The nation's properties are now the smallest in two decades, with a shift towards apartment-living slashing the size of the average new dwelling, new research shows.
The average size of a new home is 189.8 square metres - 2.7 per cent less than the 2015-2016 financial year, according the CommSec Home Size Report.
Despite this, Australian homes continue to rank as some of the largest in the world, surpassed only by the United States.
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Victorians are still building the largest houses in the country at 242.8 square metres. The smallest houses are in Tasmania, where the average is 195.5 square metres.
But the trend towards apartments has shifted the figures drastically.
This is particularly noticeable in Sydney, Melbourne and Brisbane - cities that have all recently been through record building booms in the past few years and are now seeing new unit supply.
And there aren't just more apartments, they're smaller as well. The CommSec research found the average apartment from 2004 to 2009 was 140 square metres, while in 2017 it is 130 square metres.
The smallest apartments are in Canberra, at 95.8 square metres, while the largest are in the Northern Territory at 154.5 square metres.
NSW, Queensland, Western Australia and Tasmania all have averages under 130 square metres.
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But the decline in the average dwelling size is also due to the rising popularity of semi-detached homes and townhouses, CommSec chief economist Craig James said.
"Generation Y, millennial couples and small families want to live closer to work, cafes, restaurants, shopping and airports and are giving up living space for better proximity to these desirable amenities," Mr James said.
"There are still McMansions being built, but there are fewer of them."
The average house is now much bigger than 20 years ago at 233.3 square metres - the largest in four years.
But the results did vary substantially from state to state.
"In the past year the average size of houses built in both South Australia and Western Australia has lifted.
"In fact South Australia built the biggest homes in records going back 30 years."
The earliest built apartments were seen as being "house like" but the modern developments are more influenced by affordability and accessibility, Urban Taskforce chief executive Chris Johnson said.
"The people who occupy apartments are more likely now to be single people or couples who need smaller spaces," Mr Johnson said.
"The other issue is location. Many apartment dwellers want to be very close to the action, but this is expensive, hence the move to smaller spaces."
While apartments were getting smaller, he said design had improved to make these spaces more liveable with larger windows and open-plan layouts.
