Shock cost of having just one extra bedroom in Sydney

Sydney families are squeezing into ever smaller housing as alarming figures reveal just how much more you have to pay for each additional bedroom in a home.

Prices for smaller Sydney homes have exploded over the past five years as cost of living pressures and mounting housing affordability barriers push families out of larger homes.

Alarming figures have revealed a nearly $1m average difference in the prices of homes with four bedrooms and those with two in many Sydney areas.

The price gap has become a considerable market barrier and the result has been more families squeezing into smaller houses to save money.

But the increase in competition for smaller homes has also poured fuel on prices, with the cost of two-bedroom homes doubling since 2019 in many Sydney regions, including the CBD and surrounds.

One additional bedroom can add close to $500,000 to the price in some areas.

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This level of growth has far exceeded the price rises for homes with three-, four- and five-bedrooms.

Diaswati Mardiasmo, the chief economist at national real estate group PRD, said families were scrambling for smaller homes out of necessity – and competition was ramping up.

“Families are realising the three- or four-bedroom house isn’t doable and they’ll have to squeeze the family into something smaller,” she said.

“It’s rejigging the mindset away from this idea that everyone has to have their own room.

“It makes Sydney different from other capitals where buyers will go for as many bedrooms as they can get because the price differences for getting more rooms aren’t as great.”

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Jessica and George Liang, with baby Olivia, are selling up their unit in Wentworth Point but said finding a larger home was difficult. Picture Thomas Lisson

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Ms Mardiasmo added that the low supply of quality, yet affordable, entry level homes in many areas, coupled with high demand, meant the prices of smaller homes were soaring.

PRD data showed the median price of two-bedroom houses within the City of Sydney grew by 106 per cent in the five years since 2019.

This was more than double the rate of price growth for all other types of houses in the region, which includes Haymarket, Ultimo, Alexandria, Erskineville, Glebe, Redfern, Surry Hills and more.

The top performing apartments in the same region were one-bedroom units, with price growth of 24.1 per cent eclipsing that for larger apartments with more rooms.

Robert Moir, with agent Stephanie O'Sullivan, is selling a family unit in Huntleys Cove, where units are a popular alternative. Picture: Jeremy Piper

There was a similar trend in the Parramatta region, where price rises for two- and three-bedroom houses were above those for four- and five-bedroom houses.

Sydney was the only major capital to have this trend of prices for smaller homes outpacing larger homes. In all the other capitals, bigger houses tended to deliver better growth.

“Buying a house with just one more bedroom is such a jump in Sydney,” Ms Mardiasmo said. “It’s enough to make people think twice about buying something larger.”

PRD analysis showed extra bedrooms attracted the biggest premiums within the St George area, Greater Parramatta, northern beaches and inner Sydney, along with The Central Coast.

There was an average $905,000 price difference between two- and four-bedroom homes in The City of Sydney, which expanded to $1.15m when comparing five-bedders and two-bedders.

This one-bedroom, 45sqm unit in Potts Point sold for $1.1m.

In Parramatta, the average price difference between two and five bedrooms was $450,000, in the St George area it was $700,000 and in the Hills District it was $1.1m.

There were even staggering differences across the apartment market, where price differences could not be as easily explained by varying land sizes.

Upgrading from a two-bedroom unit to a three-bedroom one in the northern beaches typically cost an extra $770,000-odd, while making the same jump in the Hills Shire cost about $400,000.

Three-bedroom units were an average of about $220,000 pricier than two-bed ones in The Central Coast and in the City of Sydney it was an average of about $570,000.

By contrast, upgrading from a two-bed to three-bed unit in the City of Melbourne required an extra spend of just $2000, on average. In the City of Brisbane the extra sum needed for a three-bed was $112,500.

This one-bedroom unit in Elizabeth Bay sold for $1.6m.

McGrath Strathfield agent Ania Aquino said many families who would normally have wanted larger houses in the past have decided instead to target units in amenity rich areas.

“For many families, upsizing now just means moving to a slightly bigger apartment,” she said.

“The lifestyle you’d get in an area like Wentworth Point – where it’s well connected, with lots of cafes, parks, places near the water – can be seen an attractive alternative to a large, unaffordable house.”

Jessica Liang lived in Wentworth Point for eight years and will take her home at 104/21 Verona Drive to auction this weekend and said the “village” atmosphere in the apartment block was a draw.

“We were lucky to get one of the bigger apartments,” she said. “A lot of the new units are much smaller, but the benefit of the area is that there is a lot around you and there’s lots to do outside.”

The Agency’s Stephanie O’Sullivan, who is selling a unit at 18 Karrabee Avein in Huntleys Cove for the Moir family, said she’s observed a similar trend in that suburb, which offers cheaper units in an area dominated by multimillion dollar mansions.

She said: “The units are hugely popular because most people have been priced out of the houses and the estates offer tennis courts, pools, gyms and lots of other things. But the units rarely come up for sale so there’s strong competition.”

COST OF AN EXTRA BEDROOM

(avg. price difference going from 2-bed to 3-bed unit)

City of Sydney $571,000

City of Parramatta $272,000

Georges River Council $202,000

Central Coast $218,000

Northern Beaches $767,500

Hills Shire $411,000

* City of Melbourne $2,000

*City of Brisbane $112,500