Have buyers abandoned McMansions (forever)?

It only seems like yesterday we were told Australia had the largest new houses in the world (e.g. see here and here). Now it seems we’ve seen the error of our ways. According to this press report, the head of residential communities at property developer Stockland, Mark Hunter, has no doubt  the era of ever-growing McMansions is over – he expects home sizes to shrink as fast as they grew in the first decade of this century. Mr Hunter is reported as saying three-bedroom, two bathroom houses are the new sweet spot in the market:

With power prices increasing, people want more efficient homes and are happy to sacrifice extra bedrooms, rumpus and media rooms and make do with a single open-plan living and dining area opening onto an outdoor area.

Stephen Albin, the chief executive of the Urban Development Institute of Australia, says the trend to shrinking new home sizes is only just beginning:

I think there’s a massive shift going on and we are at the front end of it. People are starting to realise a five-bedroom house has other costs, from the amount of leisure time you lose maintaining it, to heating and cooling, and you are going to start to find we are at the front end of that shift

He sees a permanent change in Australians’ preferences. “The McMansion’s days are numbered”, he asserts, “just look overseas and see what’s happening”.

In a recent address to CEDA, the CEO of Stockland, Mark Quinn, argued that people are choosing less debt over having five bedrooms and a separate dining room they use once a year at Christmas. People are more patient now, he said, and rather than seek instant gratification they “prefer to wait and have less debt”.

Have Australian fringe buyers really lost their taste for big houses virtually overnight? And is this really a permanent change – is it a “paradigm shift”? Only a few months ago we were debating in these pages home buyers’ preference for seemingly ever-larger dwellings!

I’m hard pressed to see it. Sure, electricity prices – which really could drive a permanent shift toward downsizing – look like they’ll keep rising, but as I’ve pointed out before, there have been massive improvements in the operational energy efficiency of new detached houses over the last ten years. The per capita operating energy required by the average new greenfield dwelling in 2008 was about a third lower than it was in 2000. In fact it was lower than it was in 1960, nearly 50 years earlier, notwithstanding the size of the average new greenfield dwelling more than doubled over this period.

The latest edition of Property consultant Oliver Hume’s Survey of purchaser sentiment in Melbourne’s Growth Areas doesn’t suggest buyers tastes have changed. When the  company asked land buyers what size house they intended to build, the proportion who said greater than 279 sq m was the same in June 2011 (30%) as it was in December 2010 (Oliver Hume say the actual size buyers end up building is about 50 sq m smaller). Read the rest of this entry »