Is this the potential solution for the housing affordability crisis?

Drastically shrinking the block size of an average house would improve affordability by slowing price growth. Housing will become more accessible to more people as they can buy a smaller block but for a lower overall price.

Domain’s latest data shows block size has shrunk in most capital cities over the past 10 years as they densify, but house and unit prices per square metre have also been rising during the same period amid heightened demand.

The price per square metre is the sold price divided by the land size or floor size, with the value calculated from the relevant region. 

Housing will become more accessible to more people as they can buy a smaller block but for a lower overall price. The cost of land is the major component in a house purchase, and it’s what creates a premium, so if buyers are getting a smaller portion of land, the amount they’re paying is contained.

In Sydney, land size shrunk by 4.6 per cent to 563 square metres over the past decade. During the same period, price per square metre surged by 130.7 per cent in Sydney.

Smaller land size helps to maximise the amount of dwellings that could be made available, so even though the price per square metre is rising across both houses and units, it’s probably not rising as quickly as it otherwise would if we weren’t seeing increased density.