Analysis reveals most homes are built for families, despite majority of households being smaller
More than 60% of Australian households consist of just one or two people, yet the nation’s housing stock remains predominantly designed for families, according to new research from property data firm Cotality.
The analysis highlights a significant disconnect between the composition of Australian households and the types of homes being constructed. While the traditional image of the “Great Australian Dream” centres on families with children in three- or four-bedroom houses, current data indicates that this scenario is no longer the norm.
Couples without children and individuals living alone now make up the majority of households. Only about 30% of households are families with dependants, while 31% are couples without dependants and 27% are single-person households.
“When you look at households purely by number of people, it may be surprising to learn that 61% of Australian households are made up of just one or two people,” said Eliza Owen (pictured right), head of research at Cotality.
Despite these demographic shifts, the housing market continues to favour larger dwellings. The most common household size is two people, but the most prevalent home type is a three-bedroom property.
One-person households account for 27% of the total, yet one-bedroom and studio apartments represent just 6% of the housing stock. This trend is consistent across all states and territories, where larger homes remain the dominant form of housing.
Several factors contribute to the ongoing preference for bigger homes. The rise of remote work, the need for in-home care, and the desire for space for hobbies or guests have all made additional bedrooms more appealing. Many couples without children may also be planning to start families, which can influence their housing choices. Furthermore, as new developments extend further from city centres, homeowners are seeking more amenities within their homes, such as gyms or workspaces.
However, the composition of new housing is gradually changing. Over the past decade to June 2025, dwellings other than houses accounted for about 40% of building approvals, up from 37% in the previous decade. This shift may eventually offer more suitable options for smaller households.
Demand for larger homes remains strong, with Cotality data showing that four-bedroom dwellings experienced the highest five-year annualised growth rate nationally at 8.7%, compared to just 3.7% for 0-1 bedroom dwellings. “Higher capital growth may be part of the reason for trying to buy and hold houses over units, or larger houses over smaller houses,” Owen said.
The current allocation of housing may not be the most efficient. For example, the 2021 census revealed that there were more two-person households living in three-bedroom homes (about 1.3 million) than three- or four-person households (about 1.1 million).
“While there’s nothing wrong with more bedrooms than people in a dwelling, there could be some inefficiencies in the way housing is being allocated,” Owen said. “After all, a ‘traditional’ family of four may have more need for a three-bedroom dwelling than a household of two people.”
Policy solutions under consideration include making it less costly to move to appropriately sized homes and more expensive to hold onto underutilised housing. Proposals such as abolishing stamp duty in favour of a broad-based land tax have been suggested, though these are politically challenging. Adjusting pension asset tests to include the family home could also encourage downsizing among older Australians.
Meanwhile, efforts are underway to increase the supply of well-located apartments in major cities, but demand-side reforms may be needed to ensure these homes are taken up.
Want to be regularly updated with mortgage news and features? Get exclusive interviews, breaking news, and industry events in your inbox – subscribe to our FREE daily newsletter. You can also follow us on Facebook, X (formerly Twitter), and LinkedIn.
