Australian Property News
House size doesn't matter, land does
Posted on Wednesday, December 02 2009 at 6:23 PM
Australia may have the biggest houses in the world, but big houses don't necessarily equal the best investment, according to Destiny Financial Solutions founder Margaret Lomas.
An Australian Bureau of Statistics report has revealed that since 1985 the average floor area of new Australian homes has climbed from about 150 square metres to almost 215 square metres.
That makes Aussie homes the biggest in the world.
But Lomas says investors should worry more about location and land value than the size of the home.
"Typically, the cheaper the area the bigger the house, which supports the theory that the land component holds the greater value," she says.
"Australians still believe in location, location and so many people would pay more for a smaller house in a perceived better suburb than they would a larger house in a less popular area."
Mark Armstrong from Property Planning Australia says it's interesting that as Australians' houses are getting larger, blocks of land are typically getting smaller.
"Thus, the depreciating asset is getting bigger but the appreciating aspect of the property is getting smaller," he says.
Rismark International managing director Christopher Joye notes that the house price data his firm releases in conjunction with RP Data, and which show property values in Australia's capital cities are up 10 per cent over the first 10 months of 2009, aren't affected by the trend towards bigger homes.
"The 'hedonic' RP Data-Rismark house price indices explicitly control for a property's size and type," Joye explains.
"The house price changes measured by this index have nothing to do with changes in the types of home produced over time; they reflect the actual returns realised on the home."
"This is not, however, true of median price indices, which cannot address this problem," he adds.
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