HOUSING AFFORDABILITY PRESSURES HAVE BEEN A SIGNIFICANT DRIVER OF THE TREND TOWARDS SMALLER BLOCKS IN PERTH. WHETHER THIS TREND TOWARDS SMALLER LOTS WILL BE AS SIGNIFICANT OVER THE NEXT FIVE YEARS AS THE PREVIOUS FIVE WILL LARGELY DEPEND ON IF GOVERNMENT AND INDUSTRY WORK TOGETHER TO PROVIDE INNOVATE, WELL DESIGNED HOUSING SOLUTIONS.
A tenth of an acre block. Doesn’t roll off the tongue like quarter acre block, but that’s the average size of newly subdivided blocks in Perth.
Blocks under 500m2 – which represented just 8 per cent of newly subdivided lots two decades ago – are now ubiquitous, representing just under 70 per cent of all subdivisions in Perth in 2011/12. And the largest declines have occurred in the last five years.
The median lot size of newly subdivided blocks in the Perth and Peel region has declined by nearly 25 per cent since 2005/06 to 419m2 in the June quarter 2012.
Figure 1. Lot sizes, final subdivided lots, Perth and Peel (source: WAPC State Lot Activity)
Housing affordability pressures have been a significant driver of the trend towards smaller blocks in recent years.
The median vacant land price in Perth shot up dramatically in the first half of last decade, increasing from $97,000 in 2002/03 to $255,000 in 2006/07. However, in the last six years the median vacant land price in Perth has been relatively flat and this has been in part attributed to average block sizes declining significantly over this period.
Figure 2. Vacant land sales, quarterly, Perth and Peel region (source: Landgate, UDIA calculations)
Even though land area is a large driver of land prices, on a per square metre basis smaller blocks are typically more expensive to develop and purchase.
| Block size | No. of sales | % of sales | Median price | Median price per sqm |
|---|---|---|---|---|
| <300m2 | 1,284 | 16.1% | $179,000 | $750 |
| 300-399m2 | 1,683 | 21.1% | $209,950 | $610 |
| 400-499m2 | 2,065 | 25.9% | $229,000 | $500 |
| 500-599m2 | 1,896 | 23.8% | $245,000 | $456 |
| 600-799m2 | 710 | 8.9% | $260,000 | $406 |
| >800m2 | 345 | 4.3% | $360,000 | $242 |
| Total | 7,983 | $227,000 | $519 |
Table 1. Vacant land sales, 2011, Perth and Peel region (source: Landgate, UDIA calculations)
The differences in block sizes between and within developments needs to be noted.
New developments near transport nodes are more likely to sell a larger proportion of small lots. In 2011, over 90 per cent of the 72 lots sold in Success – a neighbouring suburb to Cockburn Central – were smaller than 400m2. Further south, located next to the Kwinana Station, more than 95 per cent of the 106 vacant lots sold in Bertram were smaller than 400m2. And in the coastal suburb Butler just under three quarters of the 328 lots sold in 2011 were smaller than 400m2.
Smaller lots in outer suburbs are not widespread – especially in the east and south-east of Perth. Serpentine-Jarrahdale is one region attracting a large influx of buyers by providing relatively larger blocks compared to the City of Wanneroo where there is a mixture of cottage and coastal lots.
| LGA | Proportion of blocks <400m2 | Median block size |
|---|---|---|
| City of Wanneroo | 48.8% | 412m2 |
| City of Cockburn | 46.4% | 441m2 |
| Town of Kwinana | 41.5% | 441m2 |
| City of Armadale | 37.9% | 432m2 |
| City of Joondalup | 37.6% | 455m2 |
| City of Swan | 32.6% | 476m2 |
| City of Gosnells | 32.4% | 500m2 |
| City of Rockingham | 22.5% | 497m2 |
| Shire of Serpentine-Jarrahdale | 10.6% | 495m2 |
Table 2. Vacant land sales, 2011, Perth and Peel region (source: Landgate, UDIA calculations)
How small can lots go?
The venerable Nick Perrignon recently wrote an interesting article calling on regulators and industry professionals to encourage nano size (75m2!) lots as an avenue to combat affordability concerns. Nick provided an example of a one bedroom, one bathroom house in Queensland which is situated on a 62m2 individual green title block. A double storey 100m2 product was built and sold for $240,000 in 2012 on this Queensland block.
Indeed, this product is clearly not for everyone. However, a number of developers concluded that there is a market for relatively smaller lots within new estates located in growth corridors.
In 2011, LWP Property Group, among others, gambled successfully on buyers’ appetite for small lots. These 5m wide, single storey terraced homes were priced at less than $300,000 for a house and land package and sold relatively quickly. A similar product (140m2) was delivered in fast growing Baldivis.
There will continue to be considerable advantages to the provision of small lots in developments strategically located next to town centres and public open space. But will the trend towards smaller lots be as significant over the next five years as the previous five? The answer to this will largely depend on whether government and industry professionals can work together to provide innovate, well designed housing solutions.