Monday, November 30, 2009

Supersized. Our McMansions lead the world


Australians are piling on sitting rooms, family rooms, studies and extra bedrooms at the fastest rate in the world, with our homes overtaking those in the United States as the world's biggest.


The news comes as a leading forecaster predicts an acceleration in rents with Sydney rents climbing 22 per cent over the next three years.

Bureau of Statistics data compiled for Commonwealth Securities show the typical size of the new Australian home hit 215 square metres during the last financial year, up 10 per cent in a decade.

By contrast US figures show the size of new American homes sliding, shrinking from 212 square metres before the financial crisis to 202 square metres in September.

New homes in other parts of the world are far smaller, with Denmark the biggest in Europe at 137 square metres and the UK the smallest at 76 square metres...

The figures lend weight to a claim by Reserve Bank Deputy Governor Ric Battellino this month that Australian house prices were high in part because Australian houses were better.

Almost half of the $250 billion shelled out on housing each year was spent on alterations and additions with 1 in every 7 new houses "simply replacing existing houses that have been demolished."

The Deputy Governor said Australians had so many holiday houses that the latest census found 8 per cent more dwellings than households.

Sydney houses are by far the nation’s biggest with new free-standing houses now typically spanning 263 square metres - providing more than 100 square metres of indoor space per person.

But the high proportion of townhouses and apartments in Sydney pushes the average dwelling size down to 205 square metres, just below the Australian average and about the same as in the United States.

"Another way of looking at it is the number of bedrooms," said Commonwealth Securities economist Craig James. "Around 20 years ago only 1 in every 6 homes had four or more bedrooms. By 2006 it was one in every 3.5 homes."

"While the fast pace of population growth points to the need for more and more homes, we are are living in the biggest homes in the world. The simple fact is they could be better utilised."

Mr James is encouraged by slight increase in the number of Australians living in each home. The average household size has crept up from 2.52 to 2.56 people during 2007-08.

It may not seem remarkable, but it appears to be the first increase in at least a century, and perhaps the first since European settlement."

"It makes sense – population is rising, as is the cost of housing and the cost of moving house, so we are making greater use of what we’ve got. Children are staying at home longer ,and more people are opting for shared accommodation. The key question is whether it's permanent or temporary. If sustained it'll save us building 166,000 homes."

In a report released this morning (Monday 12.01 am) forecasting group BIS Shrapnel says Sydney's rental market will tighten still further next year with the vacancy rate dropping below 1 per cent.

"Medium and high-density dwellings starts plunged an estimated 28 per cent in 2009, reaching the lowest level since 1987," the report says. "Housing supply is set to fall due to the low pipeline of new apartments."

BIS Shrapnel says after climbing 6.2 per cent this year and by an average of 3.5 per cent per annum in earlier years, Sydney rents should leapfrog 7.1 per cent a year for the next three years, climbing 22 per cent by 2012.

Published in today's SMH

Graphic: SMH



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10 comments:

Anonymous said...

Australian's are in love with real estate but have some of the lowest quality housing stock in the developed world. Building costs are high, quality low and sustainable designs are almost non-existent. There are probably houses still being built today that have no effective insulation and the reason the developers can get away with it is because electricity is cheap and consumers are more interested in home theatres, air-conditioners and outdoor entertainment areas than well designed and constructed buildings.

Anonymous said...

Reserve Bank Deputy Governor Ric Batellino has a nerve saying that Australian houses are "better". Like a large proportion of the population they are obscenely big - positively obese in fact. Unless we can downsize our aspirations, the planet is stuffed and/or the poorer nations cannot hope to improve their lot in life.

Adam S said...

Woohoo, we're number 1!!

Marek said...

8% of homes are sitting empty in Australia! Now thats a real scandal. Wasn't there a proposal that empty homes get taxed in order to motivate owners to rent them out?

Anonymous said...

The tax advantages of owning investment land are too generous and the costs of leaving land undeveloped in the metropolitan area too low. Melbourne is not only low density but is littered with empty undeveloped land throughout the inner and middle suburbs. A lot of this land is also near valuable and expensive infrastructure.

derrida derider said...

The first Anonymous comment is simply wrong - Australia has very low construction costs by international standards (I won't answer the bit about relative quality - new houses in other countries seem from casual observation to be pretty low standard too). Mind you, you're right about the distorting effects of ultra-cheap electricity.

It's the cost of land that's a scandal, particularly given our low population density. That and our planning-law and poor-public-transport-driven aversion to high and medium density housing.

Adam S said...

Spot on DD, land costs are what kill us and that problem is largely in the hands of state and local governments. With that said, we still have plenty of options for living in the kind of residence you want: semi-rural, medium or high density. I look out around the city in which I live and I see plenty of all three.

As for housing quality, my experience of house construction in other places I have lived is that our quality rates pretty well. Our double brick constructed houses (often insulated in the ceiling and walls) are far more thermally efficient that the paper thin construction I have observed elsewhere.

The house I live in currently requires no air conditioning and I only occasionally run the ceiling fans. Not bad for a place situated in a city where it routinely hits 40+ in the summer. Our new house has ducted air conditioning, but I doubt we'll use it much due to its orientation on the block relative to the sun and the ventilation design.

Anonymous said...

DD I'm interested in the statistics you use to conclude that Australia has low building costs. As far as quality is concerned, it's all just anecdotal evidence and my personal experience is that Australian house construction and design standards are low in comparison. So admittedly my beliefs aren't any more valid than yours. Some real statistics or study would be helpful in settling it.

Certainly Australia lacks many building technologies available in Europe and North America and a Civil engineer from Asia who is now teaching in an Australian university told me Australia was way behind international best practise in applying certain building technologies. I also believe other countries have higher energy rating requirements than Australia brought about by colder climates and higher energy costs.

Anonymous said...

Anon, re stats and low building costs in Aus, this might be useful (ignore the fact that Mr Joye is a permabull, the data he put together is useful):

'Slaying the housing cows’ – Christopher Joye in Business Spectator 06/11/2009. This is a presentation given by C. Joye & provides charts comparing land inflation to construction inflation:

https://www.businessspectator.com.au/files/MI-Speech-4.pdf

Page 21 -26
9. Supply-side: The Cost of Producing New Housing
The Extrinsic Value of Land: Australia; 1986 to 2009
Key findings from 2003 Task Force Report…
– Real building materials prices have not changed over time
- Building materials industry very efficient
– Price of homes excluding land generally tracked inflation
– The price of land has grown at much greater rate than inflation

Anonymous said...

Thanks Anon. There's nothing like having the data at hand. I still stand by my comments on energy ratings, although I can't find any stats to back it up. The bubble in land prices is certainly sucking up a lot of money that would be better spent on improving the energy efficiency of both new and existing buildings. The governments grants for roof insulation was a good use of the stimulus IMHO, certainly much better than the FHOG.

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