Did your house just get bigger? As this infographic from Will from Mortgage Choice shows (for those who can afford to buy Australia’s high cost housing) the average floor size is set to continue rising to 243.6 m2.
This infographic details the house (by floor area) and household size (people per household) trends in Australia in comparison to the rest of the world. What was highlighted was the fact that only recently had household sizes increased (possibly for the first time since European settlement) due to us using our houses (and excess spare rooms) more effectively or due to housing costs becoming unaffordable – forcing Gen Y’s to stay at home for longer periods in the family home. In terms of living space, the average is getting bigger with land lots shrinking over time. There is also a growing trend of building a home to cover as much of the land lot (as permissable by council regulations) with smaller backyards and open space in comparison to historical past. Homes in the USA were traditionally the largest, but Australia has now overtaken them with the average floor area of a new home being 243.6m2. Interestingly, Australians continue to build even larger homes during the GFC while our American counterparts reduced their home sizes which may reflect our love of our “McMansions” or our resilience of our economy in comparison to the world.
In terms of construction costs of a new home, we have seen an increase over the years mainly due to inflation. Advancements in construction methods and technology has allowed us to build a home for cheaper, more thermal efficient and at a lower price than the past. However, this has not reduced the affordability of homes with Australia having one of the most unaffordable housing in the world. This re-enforces the issue that cost of materials and labour is not the driving force of rising house prices as it is relatively cheap to add an extra 10sqm to a new home which will only cost a few thousand dollars as opposed to purchasing a larger land lot. This is a driving motivator for new home builders to “build larger”, pushing up the national average in house size.
Gen Y’s have shown to have the mindset of saving more than their previous generations – contrary to popular belief that they are more liberal with their spending. We are already seeing, and will continue to see a growing population staying at the family home longer in order to save for a deposit as housing costs continue to increase. Some steps Gen Ys can take include budgeting more carefully and cutting out any unnecessary expenditure and saving as large of a deposit as possible for a property to reduce the size of the home loan required to be taken out.
The increase in household size may be attributed to several factors other than Gen Y’s staying at home longer, but due to high costs, many opt for a shared housing approach with their peers by splitting costs and therefore utilising all available rooms in a home.
Lenders will continue to provide funds in the market provided that there is no major risk of a housing price collapse. One of the other factors that goes into keeping the house prices up, is the high LVR home loans. And as such, 95%-100% lend home loans are making a comeback indicating funds are being more readily available than the post-GFC period as lenders are becoming less risk-averse.