Development of new housing in Sydney is highly polarised, with a disproportionate number of one and two-bedroom apartments at one end of the spectrum and detached houses at the other end. However, as the size of all dwelling types shrinks, the gap in the middle is becoming wider. Medium density housing typologies such as terraces and townhouses play an important role in filling the gap known as the ‘missing middle’. They often represent the best of low-rise, high density living within proximity to shops and transport by providing a relatively cost-efficient home, often with a small garden.

According to ABS data from 2022-23, the cost of building a new townhouse in NSW is, on average, almost 9% cheaper than building an apartment, and 18% cheaper than building a new house¹. Townhouses in NSW are, on average, about 30% smaller than detached housing, but 55% larger than the average apartment². Terraces and townhouses generally also have more private open space than apartments. This shows that townhouses sit in a ‘sweet spot’, typically larger than apartments, slightly smaller than a house and cheaper to construct.

This data also points to an interesting trend as in the ten years between 2012-13 and 2022-23, in NSW, new apartments and houses have reduced in floor area by 18% and 7% respectively, while new townhouses have not changed in size. This means that the relative advantage of houses providing more space is reducing, and the advantage of townhouses providing more space than apartments is increasing.

While the provision of smaller apartments increases the number of dwellings with smaller floor areas, this increase in housing diversity needs to be offset by the provision of more family size apartments and an increase in medium size dwelling types like terraces and townhouses. Smaller apartments provide fewer bedrooms, a key determinant of population density. In Greater Sydney, 60% of all apartments are two-bedroom, while just under 16% of apartments have three bedrooms or more³.

A study⁴ by the Grattan Institute in 2011 found that the ‘number of bedrooms’ ranked highest in the What Matters Most survey about dwelling preferences across Sydney and Melbourne. Whether the home is detached ranked 5^th and having a big garden ranked 20^th. Survey participants across all groups had a high preference for locational features such as proximity to local shops and public transport. Having a detached house ranked higher (2^nd and 3^rd) for couples without children (aged 45-64 and aged 18-44) than it did across the overall group. However, the big garden becomes a higher priority for ‘young couples with children’ (ranking 7^th) it did not rank in the top ten for the groups without children. All of this suggests that while the number of bedrooms is a ‘deal-breaker’, and the proximity to local shops and transport is often a high consideration, the preferences for the type of dwelling (whether it is detached) and the size of the outdoor space are more varied. 

As overall dwelling sizes decrease, combined with an increasing demand for more dwellings in well-located, infill areas, it seems inevitable that the detached house will continue to be replaced by higher density dwellings. As the detached house is slowly shrinking in size and the townhouse remains about the same, the differences in these housing types will become less pronounced. And as apartments get smaller, the need for smaller townhouses and terraces also increases. This all points to a need for medium density housing to not just ‘fill a gap’ by providing additional dwellings, but also deliver a diversity of housing including townhouses and terraces.

References

1. Australian Bureau of Statistics (April 2024) ‘Building Activity Average Cost (dollars)’ [data set], Building Activity Australia, accessed 9 May 2024.
2. Australian Bureau of Statistics (April 2024) ‘Building Activity Average Floor Area (square metres)’ [data set], Building Activity Australia, accessed 9 May 2024.
3. Taylor, Andrew. “Can Big Apartments Solve Sydney’s Housing Crisis?” Sydney Morning Herald, June 25^th, 2023.
4. Weidman B. & Kelly J. (2011). The Grattan Institute, “What Matters Most, Housing Preferences Across the Australian Population.”

By Nicky Hughes
Consultant