The future of the land market: Why small blocks are big again

Smaller lots provide promising opportunities for buyers and developers.

Along with interest rates, construction costs and home values, the popularity of small lots is increasing. Not only do they offer first homebuyers a chance to enter the market, they’re also a more profitable option for developers.

The rise of compact, affordable lots is nothing new. Changes in land zoning regulations and worsening housing affordability have seen a consistent trend towards smaller blocks of land over the last 30 years. In 1993, the median land size was approximately 820sqm. By 2018, it had dropped to 610sqm and it currently sits at around 392sqm, a number that fluctuates depending on the availability of stock at the end of the month. So far this year, 66% of sales are for lots under 400sqm. At Red23, the majority of our enquiries are for lots between 250sqm and 350sqm.

Let’s look a little closer at why small blocks are big again.

1.???? Affordability and accessibility

First, the obvious one – affordability. As we all know, interest rates are up along with land prices and construction costs. Average budgets are between $300,000 and $350,000 for land, $300,000 and $400,000 for construction, and $600,000 and $700,000 for house and land packages. Small lots make housing more affordable and accessible to a broader range of people, including first homebuyers and those looking to downsize.

2.???? Home values are on the rise again

Australian home values are once again on the up, increasing by 4.9% since February 2023. While this is creating an extra challenge for buyers dealing with high interest rates, it also presents an opportunity. Savvy buyers realise that if they get into the market now, they may experience property value gains in 2024 and 2025 so they’re happy to compromise on lot size.

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3.???? Urban density and sustainability

Our cities are growing and we’re short on space. Smaller blocks can help accommodate more residents in a given area, which aligns with the push for sustainability. A reduced carbon footprint is a significant consideration, as it's much more efficient to provide services and infrastructure for a denser population.

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4.???? Changing lifestyles

Last month, we shared an article on the changing face of Australian households looking at family structures, our ageing population, working from home and multi-generational living. There’s no doubt that the way we live is evolving, with many people embracing a more compact and efficient lifestyle. Smaller homes mean less maintenance which appeals to busy professionals, empty nesters, and the environmentally conscious.

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5.???? Demand for location over size

Location, they say, is everything. People are prioritising where they live over the sheer size of their property. They want to be close to their workplace, amenities, and entertainment. During the pandemic, a sea or tree change was appealing but for some, this has led to regional regret. As more people head back into the office, small blocks in well-located areas can lead to good returns for developers.

Small blocks are not just a trend, they’re a reflection of the changing needs and aspirations of today’s property market. In 2024, we predict that building prices and interest rates will stabilise, confidence in the market will improve and the popularity of smaller lots will continue to rise.?

About Red23

Red23 specialises in sales and marketing for new land and townhouse communities across the eastern seaboard of Australia. We specialise in custom and data-driven strategies that turn prospective buyers into proud owners and help build thriving communities.

Since opening in 2007, we’ve built strong and lasting relationships with Australia’s leading developers and become a natural extension of their teams. While our clients have diverse projects ranging from 50 to 2,500 lots, they all want the same thing - an agency that will pull out all the stops to deliver exceptional results.