Australian buyers are paying more for less, with a new report from Domain showing the average block size in large capital cities shrank 13 per cent over the past 10 years, with the price paid per square metre increasing at the same time.
Perth and Melbourne were home to the largest decreases in block size based on properties sold, falling by 16.2 per cent and 9.2 per cent between 2012 and 2022 respectively, Domain reported.
Adelaide, Brisbane and Sydney all saw decreases of between two per cent and five per cent during the same time, while Canberra, Hobart and Darwin saw decreases of less than one per cent.
Sydney is the most expensive city on a per square metre basis ($2466 per sq m) while Darwin is the cheapest at $737 per sq m, according to Domain.
Melbourne was the second most expensive city ($1811 per sq m), while Canberra was third ($1517 per sq m).
The Sydney suburb of Paddington (median block size 125sq m) was the most expensive across all capital cities, with a per sq m price of $25,755.
The figures were calculated based on an analysis of residential houses sold nationally between 2012 and 2022.
Domain calculated the price per sq m using a property’s sold price divided by its block size.
Dr Nicola Powell, Domain’s Chief of Research and Economics said the increase in price per sq m reflected changing buyer preferences.
“Escalating price per sq m costs reflect our housing preferences of living close to a city or the coast in search of a certain lifestyle, location and proximity to amenities and infrastructure, especially in our major cities,” Dr Powell said.
While reduced block sizes had the potential to reduce housing costs, this was not reflected in the current data, she said.
“Shrinking block sizes should help to slow the growth in house prices, as the cost of land is the major
component in a purchase,” she said.
“However, per square metre, the land cost has not reduced – buyers are just purchasing less of it.
“As a result, areas with the largest decreases in block size have had growth in price per sq m outpace house price growth at a faster rate, meaning that the true cost to buyers is growing faster than the median house price alone suggests.”
Increased land costs were not isolated to the capital cities, with the report showing that costs in popular sea and tree change areas had increased significantly since the start of the Covid-19 pandemic.
Dr Powell predicted that per sq m prices would continue to increases unless planning policy changed.
“Policy change, land release and property tax reform is needed to see a drastic change in price per sq m affordability to improve,” she said.
The shifting of key jobs to outer middle-ring and outer suburbs would also help.
“The city fringes offer a much cheaper price per sq m and with more jobs moving to commercial hubs such as Parramatta and Macquarie Park, these outer areas will become more attractive due to the potential for lower workplace commute times,” she said.
“Having multi-region cities will help to distribute wealth across a larger area and provide equal access to education, healthcare and employment opportunities.
“This will also help to spread the cost per sq m to be less heavily centred in towards our CBDs.”
Dr Powell said breaking down property prices into price per sq m was a valuable method of comparing pricing between areas.
“For buyers, it’s valuable to understand the price per sq m of any home you are looking at to standardise the cost of housing, making it easier to compare different sizes geographically,” she said.
“It can be used to compare neighbouring suburbs to identify areas that might offer better value for money and allows you to compare the value of different properties to that of the suburb average.
“Some cities have a higher median house price where often dollars go further in terms of what you can actually afford while others have neighbouring suburbs with vastly different prices per sq m due to gentrification so it’s worth noting where to look.”
