The United States has traditionally vied with Australia for the mantle of biggest homes in the world. But average home size in the US has been shrinking for the past three years. New homes in Australia are around 10 per cent bigger than in the United States and 9 per cent bigger than in New Zealand.

Despite still building the largest homes in the world, Australia has constructed a larger number of smaller apartments over the past two years, resulting in a reduction of the average home size. In the nine months to March the average new apartment was 133.7 square metres, the smallest result in a decade.

Not only has home size appeared to have peaked but the number of persons per home has hit a trough. NSW continues to build the largest houses in the nation while the Northern Territory builds the largest apartments. South Australia builds the smallest houses in the nation.

Key findings & implications
Data on average home size across the globe isn’t readily available. But on the information available it is clear that Australia is still building the biggest homes in the world. The latest figures indicate that the average new home built in Australia is around 10 per cent bigger than in the United States and 9 per cent bigger than in New Zealand.

CommSec commissioned the Australian Bureau of Statistics to calculate the average floor area of new homes built over the nine months to March 2011 (latest data) and update data for the two previous financial years. The data shows that the average floor area of new Australian homes (houses and apartments) stands at just over 214 square metres, up 5 per cent over the past decade. By contrast, latest figures show that US new homes are similar in size to a decade ago having contracted in size over the past few years. In calendar 2010, the average size of new homes completed in the US stood at 195.2m², with the average new house estimated at 222.2m².

Homes in other parts of the world are far smaller. According to figures from the UK Commission for Architecture and the Built Environment, Denmark has the biggest homes (houses and flats) in Europe with an average floor area of 137 square metres, followed by Greece (126m²), and the Netherlands (115.5m²). Homes in the UK are the smallest in Europe at 76m². Website Demographia.com reports that the average new home in Japan is 132m² with the average house at 187m². And a free-standing new home built in Canada is around 177m².

Certainly it makes sense that Australia builds bigger homes than in other countries, given that population density is far smaller than in other parts of the world. But it also helps to explain why homes in Australia cost more. Not only are they bigger, but arguably the standard of homes constructed is also higher than in other parts of the globe.

Despite still building bigger homes than other advanced nations, it does appear that home size is at, or nearing a peak, in Australia. In 2008/09, the average new house hit a record high of 248 square metres. The average house size eased to 239 square metres in 2009/10 before edging back up to 243.6 square metres in the nine months to March 2011. In the March quarter alone, the average house completed was 247.4 square metres.

In terms of apartments, the peak was probably back in 2004/05 at 143.7 square metres. In 2009/10 the average new apartment was 143.4 square metres. The size of a newly-built apartment fell sharply to 133.7 square metres in the nine months to March 2011 – a decade low. In the March quarter alone apartment size was even smaller at 128.9 square metres.

Interestingly Australians appear to be making greater use of their bigger homes. For more than a century, the number of people occupying a dwelling has been falling. But the latest data suggests that the number of persons per dwelling rose from around 2.53 in 2003 and 2004 to around 2.66 persons currently.

Has home size hit a peak in Australia?
Back in 1985 the average home in Australia was around 150m². By 1995 this had risen to 175m² and another decade later home size had risen to 210m². That is an amazing 40 per cent increase in the size of the average Australian home in the space of 20 years. At some point Australians were going to stop adding extra bedrooms and living rooms to their houses and apartments, and that point seems to have arrived.

For the past five years the size of the average home has gone sideways. Could this indicate that home size has peaked or reflect part of the “new conservatism” of Australian consumers? It seems a combination of the two. House size couldn’t keep rising, but consumers in Australia have also decided to live more simply than in the past. It is also a case of demographic change. Gen Y places less importance in home ownership than past generations, preferring to maximise life experiences. And the ageing population also points to less demand for bigger homes, with greater demand for smaller apartments, close to amenities.

Interestingly there are differing trends across the states and territories. Northern Territorians have been building bigger houses and apartments in recent years. West Australians also have been building bigger houses, no doubt reflecting higher incomes associated with the mining boom.
But in South Australia, the ACT and Tasmania, new houses are smaller than a decade ago while apartments are similar in size or smaller over the same period.

Implications for the housing industry
Clearly the trends in home size and home occupancy are super-important for the housing industry, housing-dependent industries as well as government departments.

If home size has peaked and Australians are looking to better utilise existing dwellings, then this may lead to reduced demand for building materials and increased demand for renovations. People may move house less frequently, seeking instead to renovate existing properties, especially those that are well situated to amenities like shops and transport.

Certainly Generation Y has shown greater preference for smaller homes, well situated to work, transport, cafes and entertainment venues. Baby boomers nearing retirement may also focus on downsizing, preferring locations with proximity to transport and shopping strips or centres.
And still other households in the Gen X and Baby Boomer categories may prefer to stay in existing homes but seek to renovate to allow shared access to the extended family. It’s worth noting that the recent Productivity Commission report into Aged Care highlights the preference of seniors to be cared for in their family home which may lead Governments to provide incentives for renovation or expansion of homes rather than building new dwellings.

Economists continue to be baffled by the failure of home building to lift to the level of assumed underlying demand. However the “apparent paradox” can be explained by structural change such as demographics and increased utilisation of Australia’s large homes.

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