Are Melbourne’s houses too big?Posted: April 20, 2011
According to the State’s Building Commission, new houses in Victoria were 252 m2 on average in 2008-09 compared with 217 m2 in 2000-01. This report says “homes in Victoria are getting bigger, much bigger – leading to warnings that some people may be building homes bigger than they need by borrowing more than they can afford”. The Building Commissioner is quoted as saying:
The promotion of larger homes by medium and high volume builders, where added rooms are used as a marketing tool, have contributed to the increase in size……consumers are up-sold to home theatres, additional bathrooms and media rooms
I have a couple of thoughts/reactions to this.
First, some context – while there are buyers who want a behemoth like Metricon’s 49 square ‘Monarch’, almost three quarters (74%) of Growth Area buyers purchase a single level dwelling. Moreover, 70% of homes are less than 30 squares and 47% are less than 26 squares. Some are buying a “McMansion”, but most are buying something like Metricon’s Grandview.
Second, the claim that buyers are so gullible they are “upsold” to bigger homes they don’t “need” is patronising. Buyers do know what they want. Two thirds of Growth Area purchasers are buying their second home – half of this group are buying their third or fourth home. And nearly half (48%) of adult buyers in the Growth Areas are aged 35 years or more.
Third, if people are buying homes they can’t afford, that’s not primarily an issue of dwelling size. I expect over-stretched buyers would more likely be purchasing a home that’s closer to the city centre — it would be smaller than a fringe “McMansion” but cost more because of its greater accessibility. If there has been an upward movement in the proportion of people buying homes they can’t afford, the problem and the solution lie with lending policies rather than with dwelling size.
Fourth, there’s nothing inherently unusual or “wrong” in people buying more of what they want. If something they like gets cheaper or they get richer, on average people can and will buy more of it. In this instance the focus is on people choosing to buy more housing space but they could just as easily be buying more restaurant meals, overseas holidays, Vespas, private school hours, iPads, or whatever.
Fifth, what matters is that buyers pay their real costs. The problem to address isn’t the size of houses per se, but distortions in price signals that lead to excessive resources being diverted to housing. The focus should be on issues like the tax-sheltered status of owner-occupied housing and the absence of a price on carbon.
Sixth, this isn’t just a fringe Growth Areas issue. I live in the northern suburbs 8 km from the CBD and virtually every house in my neighbourhood has been extended in its lifetime or replaced by a new detached dwelling – in fact there’s something with the faux Robie House look of the ‘Monarch’ not far from where I live. An area of 253 m2 (27 squares) would no longer be considered exceptional in this area. When the average household size is compared with the suburbs, I suspect houses in my neck of the woods probably have at least as much space per capita as houses in the Growth Areas.
Finally, this issue reminds us that there isn’t necessarily a simple and direct relationship between household size and dwelling area. If they can afford it, people want space – that’s why the penthouse was invented. This has particular relevance for ‘empty-nesters’ who, policy makers often assume, want to down-size. There’re many reasons why that might not be the case — in fact it seems they prefer to hang on to their large house rather than relinquish it for use by a family.