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“Our standard is two bedrooms, 1½ “This house has 12 bathrooms and two parking spaces in a good location,” Delango said.
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“We knew we couldn’t get anything big, but we found we still had to compromise within our budget.
“All the houses that fit our price range end up going over (the $850,000 mark) at auction. It’s a little frustrating sometimes, but we’ve decided where we want to live. For us, lifestyle is more important than house size.”
Ultimately, the two bought a two-bedroom, one-bathroom villa eight blocks across the border in Heidelberg through the buyer’s agent, Wendy Chamberlain of Chamberlain Real Estate.
Mr Chamberlain said first-home buyers tended to value lifestyle and community over a large home far from the city.
“A desirable location is more important than space. Location and proximity to work are the most important factors now. People don’t want to commute, they want to be able to enjoy amenities and community,” she said.
“Now people will sacrifice space for that.”
This has led to an increase in demand for properties in inner-city hotspots, with younger property buyers in particular reluctant to leave the comfort and convenience of the metropolis, she said.
As for why the price gap between three- and four-bedroom homes is so large, Mr Chamberlain said it reflected differences in overall size between properties, location and rising construction costs – which made it more difficult than ever for buyers to upgrade from an apartment to a family home.
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The price gap between two- and three-bedroom homes is even wider, with buyers having to shell out an extra $235,000 for a third bedroom. The average price for a two-bedroom is $590,000, while the average price for a three-bedroom is now $825,000.
Domain head of research and economics Dr Nicola Powell said the gap between three- and four-bedroom homes was indicative of the quality of four-bedroom homes.
“When you have a bigger house, you often also have a second living room and maybe a rumpus room or study,” she said.
“The $100,000-plus difference between a three-bedroom and a four-bedroom home shows a very clear price difference, and I think most four-bedroom homes are in another class.”
But despite the disparity, Powell said smaller homes are attracting demand due to affordability constraints and increasing urban density.
“Over time, our housing stock is likely to shrink … block sizes are shrinking across Australia. And the question that follows is how do we improve housing affordability as our population expands?”
Mr Powell added that while the price gap for a bedroom in Melbourne was wide, it was still much smaller than in Sydney ($289,200) and Perth ($150,000).
Barry Plant chief executive Lisa Pennell blamed high transaction costs for the price difference between three- and four-bedroom houses in Melbourne.
“It’s impossible to trade here at the moment and many business people are attracted by government contracts,” she said.
Mr Pennell added that while Melbourne’s market remained somewhat subdued, demand for premium homes remained high.
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