February 9, 2022 by Dymphna

What the ‘race for space’ means for property

The race for space defined 2021. What about 2022?

Now one of the more interesting property trends that came out of 2021 was the “race for space.”

And no, I’m not talking about some billionaires, desperately clinging onto adolescence by climbing into a giant dildo and shooting themselves off into near space.

I’m talking about the way that Aussies just want more space these days, and they’re willing to pay for it.

Aussies wanted bigger houses and they wanted to live with fewer people.

It’s a bit funny when you put it like that, but that’s what happened.

First up, the average sized of a new home lifted with Covid, bringing to end a long run of declining floor sizes.

It was particularly pronounced in the unit market, where average unit sized increased significantly.

This is interesting because this is happening at the same time that houses are becoming more expensive.

In a more expensive market, you would think that people would opt for smaller (and therefore cheaper) houses. But they didn’t.

And it’s not that they couldn’t. Our homes could easily be smaller. We have the biggest homes in the world – alongside the US of course.

But no, we wanted our homes to be bigger.

Not only that – not only did we want bigger homes – we wanted those homes to have fewer people in them.

The average number of people per dwelling fell significantly with Covid.

So that’s what we’ve got. We want bigger homes with fewer people in them.

This obviously has big implications for the property market.

And it help us understand one of the key puzzles of the Covid era.

The puzzle is why did vacancy rates collapse – why did rental markets become incredibly tight and why did rental prices boom – when we actually had fewer people, thanks to the closed borders?

That took a while for me to get my head around.

You can see it in the vacancy data. Nationally the vacancy rate is now just 1.3% – the lowest level on record.

But as we know, immigration went to zero, and the Aussie population is about 400,000 people smaller than it otherwise would have been.

That should have put some slack into rental markets.

But it didn’t.

Because as the same time as there were fewer people floating about, we all decided that we wanted bigger homes and we wanted to live with fewer people.

We wanted to get away from each other.

There was a race for space.

And will it continue.

I genuinely have no idea. Will people decide that they’re happy to live with more people again? Will kids move back in with their parents. Will people set up bigger share-houses, or create some multi-family options.

I truly have no idea.

Because it may be that this has nothing to do with Covid, and more to do with the fact that money-printing put more money in people’s pockets, so they were happy and able to pay for a bit more space.

We’ll have to see.