Who’s got the biggest?

When it comes to land area, size matters.  Or at least it used to.  More recently, with affordability pressures from a buyer’s perspective, yield pressures from a development perspective and urban management from a policy perspective, we have seen an extended trend towards smaller blocks of land across each of the capital cities.

The trends are actually counter intuitive in some ways.  The capital city with the smallest median area for land sold over the year to July is Adelaide, where established house prices are the most affordable of any mainland capital city.  The typical block of land sold across Adelaide over the 12 month period was just 380sqm compared with median land sizes closer to 600sqm in Sydney, Melbourne and Brisbane.

In Sydney, where housing prices are generally the most expensive of any capital city, the median land area has diminished by less than 5 percent over the past five years from 602sqm in 2001 to 574sqm in 2011 (Adelaide’s median land area has reduced by 37%, Perth’s by 23%, Melbourne’s by 17% and Brisbane’s by 14%).  The typical block size has hardly moved at a time when buyers are becoming more and more price sensitive.

The differences in land area from city-to-city and development-to-development are worth noting.  With such a broad range in land sizes, comparing simple median selling prices can be misleading.  A rate per square metre measurement is likely to be more appropriate.

As an example, based on a rate per square metre measurement, the most expensive land across the State Capitals is actually located in Perth where the median selling price on a square metre basis is $529.  Sydney is second highest at $490/sqm, followed by Adelaide where land is selling at $465/sqm – that’s 9.7% higher than Melbourne prices and almost 20% higher than Brisbane’s on a rate per square metre basis.  On a simple median price basis Adelaide land looks to be around 7% lower than what is selling in Melbourne and Brisbane.

In my view, smaller blocks of land are a smart strategy.  Smaller land allotments tend to be cheaper for consumers and they maximise the development yield for strategically located land such as sites close to major population centres and transport connections.  Smart home design should maximise the land use while still retaining some private ‘green space’ on the property.

There needs to be some balance of course; small allotment estates need to provide for open space and recreational areas where yard space is being sacrificed.  This is generally the case in any master planned community or quality development.  Prospective buyers are likely to overlook those land releases and housing estates that don’t strike this balance.

Why hasn’t Sydney ventured further down the path of smaller housing allotments?  I’m not sure, but would suspect it relates to local town planning regulations rather than any lack of buyer demand or developer motivation to release smaller housing blocks into the market.

About Tim Lawless

Tim heads up the RP Data research and analytics team, analysing real estate markets, demographics and economic trends across Australia

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One Response to Who’s got the biggest?

  1. simon June 10, 2012 at 7:36 pm #

    looking forward to all the future slums, at least the investors/parasites will have enough money to move away.

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