Is the great Aussie backyard dead?

Aussies, we are told, love their backyards.

The reality appears different.

Average lot sizes are shrinking, the proportion gardens take up on residential blocks is shrivelling and apartments as a percentage of new residences has skyrocketed.

What is behind shrinking gardens and will this trend have any impact on investors?

The mythical quarter acre block

One of the drivers of disappearing gardens has been the reduction in lot sizes.

It’s quite striking to those who visit new estates how much average lot sizes have shrunk over the decades as estate developers strive to improve their returns.

As this chart shows, the reduction in average lot sizes has been most pronounced in Victoria and South East Queensland.

The reduction in lot size to (relatively new) legal minimums and larger, newly built houses leaves many new homes with backyards at a fraction of what was common 40 years ago.

Evolving household types

The other big change in the housing versus garden equation comes via the ABS profile of Australia’s 10 million households, which shows a significant change from 20th century norms.  

Families with children are still the biggest segment at 3.1 million households but their dominance is being challenged by two other types - couples without children at 2.8 million and single person households at 2.6 million.

Underlying these numbers are even faster rises in couples who don’t plan to have children, ‘empty nest’ couples and so-called ‘long term’ singles.

The result is a consistent drop in the average number of people per household and a rise in households who typically require less outdoor space.

This changing mix of lifestyles clashes with the way many developers and governments still think; that first homebuyers are couples destined to become a family with two to three kids and 0.7 of a dog!

Urban development across Australia remains heavily focused on delivering McMansions on the urban fringe and small apartments in city centres, leaving quite a gap for investors to exploit. 

Do changing property dynamics matter?

While TV real estate programs gush over al fresco dining and in home theatres, the real driver of capital growth lies elsewhere.

As this chart depicting Australian housing values to GDP shows, the uplift in property prices is very much concentrated in the value of the land on which housing sits.

The real value of residential structures has barely changed in 35 years.

Changing lifestyles and the inexorable rise of land values highlight some interesting trends investors should pay attention to.

It doesn’t mean suburbs with the biggest lots will benefit the most, nor that areas with the highest land prices will dominate as the best propositions.

In fact, some of the best bets are in the comfortable centre of those two extremes.

Family homes still rate well

Counterintuitively, despite a changing landscape delivering a decreasing proportion of homes with large allotments, these properties still make great investments - in some areas.

Take Duncraig, nestled midway into Perth’s northern suburbs. With generously sized allotments and plenty of 1970s and1980s houses to choose from, family buyers have pushed the median house price to around $1.3 million, double what it was just five years ago.

When we move to the east coast, we can also see a similar effect playing out in the north west Melbourne suburb of Aberfeldie. While some neighbouring areas have been flat, Aberfeldie’s homes on large allotments have seen the median price jump to $1.95 million over the last five years.

Small allotment properties are also benefitting

While many commentators have been talking down apartments, some suburbs are showing strong returns in unit price performance.

In Melbourne, for instance, many of the standout performers are hardly glamour precincts but middle ring suburbs, some long regarded as ‘down at heel’.

Examples include Springvale, 22 kilometres out in the south east, Preston and Glenroy to the north, along with more middle class areas like Box Hill North in the east.

What sets these areas apart is not apartments, but villa units where homebuyers can enjoy a private, if small garden area.

And it’s this feature along with the affordable price point that is proving highly attractive to first home buyers, downsizing couples, single parents and long term singles.

There’s a similar effect playing out in Sydney too, with villa units in areas as diverse as Granville, Minto, North Rocks and South Hurstville performing as well, and often better than more prestigious areas in the northern beaches or lower north shore.

So, the great Aussie garden is not dead; in many cases, it’s just shrunk to meet the needs of fast rising household types.

What should property investors look for?

For investors, the rule to keep in mind is that outdoor space is still highly prized but as our cities grow, it’s the scarcity and match to the growing household types which matters the most.

Family homes on generous allotments in middle ring areas as well as affordable units with a private garden are benefitting now.

In other areas, like Sydney’s outer west and Melbourne’s north west, investors who bought old family homes are also benefitting. Those properties with big allotments continue to see strong demand from developers looking to knock houses down to build townhouses or villa units.  

As we move forward, we’re also likely to see more European-styled developments emerge, where units share a central garden delivering a communal feel.

Right now, these properties are as rare as hen’s teeth but when they do come on the market, they benefit from very high rental and resale appeal.

Outdoor space will remain a boon for investors, but as our metro areas change, it will shapeshift to meet changing realities.