I pulled building approval data from the City of Sydney for 2021-2026, and the trend is undeniable: new apartments are getting smaller, and it’s accelerating. The median two-bedroom apartment approved in 2026 is 68 square metres. In 2021, it was 80 square metres. That’s a 15% drop in liveable space.

Before anyone blames planning regulations, here’s the thing: minimum apartment sizes in NSW haven’t changed. The Apartment Design Guide still mandates 70 square metres for a two-bedroom unit. So how are we getting 68-square-metre approvals?

The Balcony Loophole

Developers discovered that including larger balconies lets them market “outdoor living space” while reducing the internal footprint. A 68sqm apartment with a 12sqm balcony technically exceeds the minimum gross floor area requirements, but you can’t exactly put your bed on the balcony.

I’ve toured six new developments in Zetland and Green Square this month. Every single one had balconies sized for exactly two chairs and nothing else. The internal storage was laughable—one wardrobe per bedroom, no linen cupboards, kitchen pantries you couldn’t fit a cereal box into sideways.

The economics are straightforward: land costs in Sydney are insane, construction costs are rising 8% annually, and buyers are priced out of anything spacious. Developers maximize profit by minimizing square meterage while staying barely compliant with regulations.

What Buyers Are Actually Getting

Let’s look at a real example. A development in Mascot approved last month: two-bedroom units starting at $820,000 for 66sqm internal, plus a 10sqm balcony. Break that down and you’re paying $12,424 per square metre of internal space. That’s 18% higher per-square-metre than comparable 2021 developments, for less total area.

The kitchen-living-dining zones are particularly squeezed. Open-plan designs sound great until you realize “open plan” means “we removed walls because we couldn’t fit them.” I measured one apartment where the distance between the kitchen island and the sofa was 1.2 metres. You can’t walk past someone cooking.

Bedrooms are hitting minimum viable dimensions. The Australian Building Code doesn’t specify minimum bedroom sizes for apartments, only ceiling heights and ventilation. I’ve seen “second bedrooms” that are 2.7m x 3.0m—technically a bedroom, realistically a walk-in wardrobe with delusions of grandeur.

The Investment Distortion

Here’s the uncomfortable truth: many buyers don’t care because they’re investors who’ll never live there. They care about rental yield and capital growth, not whether the apartment is actually pleasant to inhabit. As long as someone will pay $600/week to live in a shoebox, the market supports building shoeboxes.

Rental platforms don’t help. They list square meterage, but most renters don’t visit enough apartments to calibrate what 65sqm actually feels like. Photos with wide-angle lenses make spaces look 30% larger. By the time you realize the apartment is tiny, you’ve already committed to the viewing.

Looking Forward

This trend won’t reverse unless policy changes force it. Some councils are tightening requirements—Willoughby Council recently mandated minimum internal storage volumes, not just floor area. It’s a start, but Sydney’s housing crisis means political pressure favours density over quality.

If you’re buying or renting, do the work: measure the floor plan yourself, visit at different times of day, bring furniture dimensions. Don’t trust the marketing suite setup—those are staged with undersized furniture to make spaces look bigger.

We’re building the housing stock that’ll define Sydney for the next 50 years. Right now, we’re building it too small, and future residents will pay the price.