Does Size Really Matter?

Will they or won’t they?
August 30, 2017
What about me?
August 30, 2017

When it comes to buying an investment property does size matter? Is bigger really better?

We are one of few nations in the world where large dwellings are the norm. Actually I should say, ‘were’ the norm. The suburban sprawl that kicked off in earnest in the 1950’s through to the 1970’s saw construction of modest workers cottages and fibro homes. Throughout 1980‘s – 2000’s we saw those make way for the ‘Mcmansion’. The 1980’s were about excess and that was evident our dwellings. Australians had more money than ever before and therefore we wanted bigger more lavish homes.

In the past decade, we have seen that large house trend change. Houses are getting smaller with smarter more efficient design and apartments have become more popular. The quarter acre block is a thing of the past, new houses are now being built on blocks of 350 square metres or less. House and land estates are essentially horizontal apartment blocks. Apartment construction has boomed in the past decade and they are becoming bigger and grander. But why are we witnessing this downsize? What is driving this change? Demand … and changing household demographics.

The average household size in 1911 was 4.5 persons per household, in 2011 that figure was 2.6 persons per household. The 2016 Census shows that figure has remained steady at 2.6 persons per household. In addition to this the household structure (who the household is made up of) is changing. We are witnessing the rise of the lone person household.

The biggest jump in household structure between 1991 to 2016 is the 2 person household, followed very closely by the 1 person household. These two groups combined account for 1,943,190 new households compared to 791,144 for 3 or more person households over the same period. This being the case, ask yourself, what type of dwelling will the top group (1 and 2 person households) want to live in? Is it a 4 or 5 bedroom house in a new house estate? Or a 1 or 2 bedroom apartment in the inner-city?

The table above gives us a clear picture of household makeup in Australia. The increase of households without children between 1991 – 2016 was 1,853,037 for a total of 4,557,020 households in Australia without children. Compare this with the table below, in which we see an increase between 1991 – 2016 of 768,242 new households with children and a total of 3,606,510 households with children in Australia.

According to the latest census data, 51.4% of households in Australia are without children and 1 person or 2 persons households account for 57.8% of total households (and rising).

Property investment success is all about understanding demand. Knowing what drives it now but more importantly what will drive it over the coming years. Let data dictate your investment decision.

Happy investing!

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