The New South Wales residential market has reported strong growth for the year ending 30 June 2015.

There was a total rise of 16.23% for all dwelling types and for the month of June house prices rose 2.38% and units rose 4.56% according to the latest figures from core logic.

Ruling on minimum apartment sizes and impact on NSW

The NSW Land and Environment Court based on the Residential Flat Design Code issued a new ruling on 9 April in the case of Botany City Council v Botany Developments Pty Ltd (No 2). In this decision, the Court determined that the table in the guidelines takes precedence over ‘rules of thumb’ in the Code. Under the Residential Flat Design Code, new apartments can be up to 35% larger when using the table as opposed to the rules of thumb.

The NSW government first introduced the minimum apartment sizes in 2002 under the State Environmental Planning Policy No 65 (SEPP 65) for the purpose of improving apartment design quality. In 2008, the NSW Government introduced a new clause 30A to SEPP 65 which ensured that a consent authority was not able to reject development on the basis of apartment size when the apartment size complied with the Residential Flat Design Code.

Following this landmark decision, local councils will have greater power in rejecting apartment development applications based on apartment size. The supply of apartments could potentially decrease resulting in an increase in demand and an increase in prices. In comparison to other states, NSW will likely see a reduction in innovativeness. In other states, developers are encouraged to innovate and optimize small areas. For example, in Melbourne 40% of apartments sold are now under 50 square metres, whereas a one-bedroom apartment in NSW must be 58 square metres.

The NSW Government is trying to increase the types and variety of housing on offer whilst also seeking to establish priority precincts around existing infrastructure. By not allowing the building profession to make better use of smaller spaces through innovation and smarter design principles it will make the task that much harder.

Developers and other building professionals will need to ensure that they follow the impacts of this decision closely as this could have a significant impact on the viability of certain developments going forward. The NSW Government has proposed to reform SEPP 65 and this decision highlights the fact that urgent reform is needed.