Popularity of Small Houses in Sydney’s Inner City and Inner West

Sydney’s inner city has an industrial past and a high proportion of workers' cottages and terrace houses.

This makes many of our local suburbs, such as Erskineville, Newtown, Surry Hills and Enmore, home to some of the smallest houses in Australia.

In fact, the narrowest house in our entire city is believed to be 43 Edgeware Road, Enmore, which comes in at under three metres wide.

Earlier this year, another house on a 44 square metre block in Glebe sold before auction for $1.305 million. It was no wider than a car space. Meanwhile, in Surry Hills, a contender for the city’s smallest house at just 25 square metres sold for $1.5 million and was promptly rented out for $995 per week. Not a bad return on a property that’s around the same size as a shipping container.

Tiny homes have been experiencing increasing demand from a range of buyers, including investors, those just starting out, and out-of-towners looking for a city crash pad.

How many small homes are there?

While there’s certainly a broader trend for large-scale renovations that add space, there are still a lot of small houses available in inner city suburbs such as Erskineville. The last Census reveals that most properties in Erskineville have only two bedrooms - well below the state or national average.

According to the 2021 census, 791 properties in Erskineville have one bedroom, and 41 have no separate bedroom at all. Of course, many of these are apartments, which include bedsits, studios and one-bedroom units. However, given that over 44% of Erskineville’s properties are terrace or freestanding houses, some of these one-bedroom properties are also one-bedroom houses.

This harks back to the suburb’s roots as a working-class area, with much of Erskineville’s housing built in the Victorian era. People back then were accustomed to higher-density living, with larger families - and often multiple generations - living together within one residence.

Why buy a house when an apartment could cost less?

Small houses tend to sell well, despite - or maybe because of - their smaller proportions. But small doesn’t necessarily mean cheap.

By our count, approximately 15 one-bedroom houses have changed hands on-market in the past three years (low sales figures mean formal data isn’t available). However, published sales prices for a one-bedroom house in Erskineville have ranged from $1.06 million to $1.4 million over the last 12 months.

Typically, they tend to sell for around $1.2 million.

To give this context, as of June 2023, the median two-bedroom house price in Erskineville was not a lot higher, sitting at $1.395 million, according to Domain. Meanwhile, the median one-bedroom apartment price in Erskineville was just $705,000, and two-bedroom apartments had a median value of $1.065 million.

So if you’re in the market for a one-bedroom house in the inner city or inner west, chances are you could buy a much larger apartment for the exact same amount in the same area. Houses - even small one-bedroom houses - are typically more expensive.

However, not all buyers find apartment living appealing. Many buyers see the greater potential in owning the land with a house and for adding value through alterations or additions, and therefore realising greater capital gains over time.

But while you may not have the strata fees associated with an apartment, you do have to weigh up the cost and responsibility for all the upkeep and maintenance on a house - from the roof to the plumbing.

The tiny house movement

Despite being small, one-bedroom houses have become more popular in recent years.

The tiny house movement has been a global trend. Proponents argue that living smaller is more affordable, more sustainable, greener, and a streamlined and simpler way to live. The idea is that less space leads to less stuff and less of a footprint overall.

Real estate TV shows and magazines are full of cute, well-designed cabins and clever design solutions for multipurpose spaces.

Buyer demand for small houses

We see demand from several different demographics competing for small houses when they come onto the market. First-home buyers with a strong preference for a house rather than an apartment are often interested in one-bedroom houses, particularly if they scope to add value over time.

Many small houses have the potential to add more bedrooms, include parking, incorporate larger living spaces or reconfigure for a more contemporary living style. Some even come with a DA. And this opportunity to add more to the property can appeal to all demographics.

We also see interest from out-of-town buyers looking for a compact city crash pad without the ongoing strata fees or communal living that comes with an apartment.

Because of our proximity to the city centre, universities and hospital campuses, small houses also appeal to investors because of their rental appeal. Often a house is a more pet-friendly choice for a tenant rather than a unit.

One-bedroom houses in Erskineville and Alexandria

We’ve sold several one-bedroom houses in the inner city and inner west recently, including:

22 Flora Street, Erskineville
This compact, renovated, one-bedroom Victorian cottage with two sunny courtyards had scope to add more space in the roof, STCA. It sold for $1.183 million in June 2023.

10 John Street, Erskineville
This one-bedroom house also offered a studio with an ensuite and sold in November 2022 for $1.226 million.

192 Wyndham Street, Alexandria
With a second sleeping/office space in the attic and the potential to extend, this one-bedroom semi offered a tonne of potential and sold for $1.155 million in October 2022.

23 Mitchell Road, Alexandria
Selling for $1.15 million in September 2022, this one-bedroom terrace on one level had rare off-street courtyard parking.