Melbourne housing is also facing shrinkflation.
Shrinkflation is hitting Melbourne’s suburbs with the city’s property sizes plunging even as prices have soared in the past decade.
New figures from the Real Estate Institute of Victoria show the city’s typical home has gone from a 640sq m block to just 595sq m since 2015.
In that same timeline, the cost for each square metre of that land has risen by more than $450 to about $1550.
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Real Estate Institute of Victoria president Jacob Caine said the numbers felt similar to what was happening to the chocolate bars he buys at his local shops.
“The reality is that whilst we are paying for more and getting less for our money across most sectors, housing is no exception to that rule and the bang for your buck is diminishing year on year,” Mr Caine said.
It’s also likely to get worse, with the prospect some parts of Melbourne could attract double-digit home price growth as interest rates fall and population rises — putting further pressure to squeeze more homes into high demand regions.
“It’s becoming universally accepted that the only way we build an equitable and sustainable and affordable housing system in any developed city is by having a really strong proportion of medium density housing,” Mr Caine said.
A Bentleigh dual occupancy home build by Metricon, a process that has become increasingly popular since the building group created a dedicated part of its business for them in 2012.
Housing shrinkflation is also hitting regional Victoria, with the REIV data that tracks sales over the first three months of this year and in the equivalent period of 2015, showing the typical 696sq m property outside of the metropolitan area has lost 26 sq m in a decade.
Meanwhile the cost of that land has risen from $477 a square metre to a hefty $859.
With Australian Bureau of Statistics data released this week showing Victoria approved about 56,000 new homes in the past year, close to 20,000 below the level needed to help address the affordability crisis, Mr Caine said rising population would be a further driver of housing shrinkflation.
“And I think people are adjusting their expectations; the Australian Dream has certainly evolved in a couple of directions — the new mantra is just getting somewhere to call your own, though it used to be the 600sq m block with a four-bedroom home,” he said.
“So it’s now about what’s inside the house. It’s the home cinema and the work from home space.”
Victoria’s largest homebuilder, Metricon, has had a specialist arm for splitting blocks of land into two and building dual-occupancy homes since 2012 — and has recorded significant increases in activity in more recent years.
Homes being built on the city’s outer fringes are also occupying increasingly modest plots.
Their dual occupancy sales manager Jarrod Sturdy said with state government policy implemented this year creating more certainty for those looking to subdivide, it was likely they would become “a lot more popular”.
To date, most of the activity is coming from existing homeowners looking to downsize in place and have a rental stream next door, or to accommodate grandparents.
However, Mr Sturdy said a growing number were also seeing having two residences in the same place as a fairer way to have inheritances divided by their children.
“No one is wanting a yard to kick the footy around in … they want low-maintenance liveability,” he said.
Most of the block splitting was occurring in Melbourne’s middle ring, from Mt Waverley south to Bentleigh — though areas like Essendon and even Altona in the west could also see significant numbers of subdivisions.
Property Home Base buyer’s advocate Julie DeBondt-Barker confirmed that in the past 10 years there had been a significant shift in what buyers wanted.
A 122sq m block of land in Toorak is in the final stages of negotiations after being listed for sale at $1.15m.
“It used to be about having enough room for the kids to kick the footy, but with changes to a few things including TV shows showing homes perfectly staged, that is overriding the back yard,” she said.
“The other thing that’s drastically changed is that parents are waking up to the fact that the kids don’t kick the footy in the backyard any more. The kids want the extra gaming room — and parents are seeing that.”
The buyer’s agent said that in her experience, shrinkflation appeared to be homebuyer led, with many families now eyeing properties with bigger back yards as a place that would suit a granny flat and some even thinking about future subdivision potential.
“So the buyers are kind of driving it,” she said.
And it’s not just in the city’s most affordable areas, with a series of Toorak blocks of land measuring just 122sq m attracting buyers despite asking prices at $1.15m.
Compact blocks are being snapped up by purchasers willing to take on a smaller-scale lifestyle in return for lower costs.
Rodney Morely boss Rodney Morely said he had recently sold such a sized plot at 33 Carters Ave, Toorak, to a developer planning to build what would likely become a $3.5m home on it.
Two doors down, No. 37 is in the final stages of negotiations with another buyer — and the pair had attracted a range of interested groups ranging from builders to families wanting to get their kids into the nearby school.
“I would like to have another 50, they would sell, but they just don’t come up that often,” Mr Morely said.
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