Land, land, land, how much does section size matter?

When it comes to investing in property, one piece of conventional wisdom often gets repeated: larger sections of land lead to faster growth in value. The idea is simple—more land means more potential for development, greater demand, and therefore, higher returns. But does section size really play that significant a role in a property’s appreciation over time? Let’s take a fresh look at the data and reassess this common belief.

Bigger Land Doesn’t Always Mean Bigger Growth

It’s easy to assume that properties with more land should experience better capital growth simply because they’re more expensive. After all, the larger the section, the more it’s worth, right? However, when we look at the data, it tells a slightly different story.

Across various cities, properties with smaller sections have tended to show similar, if not better, growth rates than those with larger sections. In fact, medium-sized sections (typically ranging from 300 to 600 square meters) often outperformed larger plots during market booms. Even in more recent years, growth rates between smaller and larger properties have been strikingly similar.

For instance, when comparing properties with smaller sections (around 300 sqm) to larger ones (600-900 sqm), the difference in growth rate was marginal—sometimes as little as 0.1% per year. So, despite the common perception, the size of the land doesn’t appear to be the key driver of capital gains.

Why Isn’t Bigger Land Always Better?

Given these findings, you might be wondering: how can this be? Why don’t properties with more land grow faster? There are a few factors at play here.

First, affordability plays a significant role. Smaller properties are generally more accessible, attracting a broader range of buyers, especially first-time homebuyers or those seeking lower-cost options. As property prices rise, demand for more affordable homes tends to increase, which can contribute to faster growth for smaller sections.

Second, when people buy a home, their focus is usually on the house itself—its condition, layout, and location—rather than the size of the yard. While a large backyard might be appealing for some, for many homebuyers, it’s secondary to the quality of the living space inside. When you think about it, at most open homes, the first place people tend to look is inside the house, not the garden.

Third, homes are decreasing in size, internationally and in New Zealand. Newly built homes are smaller now than they were 50 years ago and the average dwelling size is reducing as a result. As property becomes more expensive and population grows, it’s a fairly simple equation which equals smaller homes on smaller plots of land. We can’t build more land, instead preferences develop over time, and the kiwi ‘quarter acre dream’ has changed from what it once was. Generally speaking, people are more willing now to accept a smaller section than they were in the past, and that is a trend which we expect to see continue in the future.

More Expensive Properties = More Capital Growth in Dollar Terms, Not Percentage Terms

It’s crucial to understand that while a larger section may result in higher overall value, this doesn’t necessarily translate into better percentage growth. Let’s say two properties in the same location experience a 10% increase in value—one is priced at $1,000,000, the other at $600,000. The property valued at $1,000,000 will earn $100,000 in capital growth, while the $600,000 property will earn $60,000 in capital growth. In absolute terms, the more expensive property will generate more money, but the growth rate in percentage terms is the same.

This highlights an important point: just because a property is more expensive due to its larger section, doesn’t mean it will always be a better investment in terms of capital growth. The bigger the land size doesn’t inherently mean better returns—what matters most is how much return you’re getting on your initial investment (which means you should focus on the capital return percentage not the numerical gain).

Does Land Hold No Value?

Absolutely not. Land is a valuable asset, and it does appreciate over time. But the idea that larger sections always lead to faster growth doesn’t hold up when we look at the bigger picture. The value of land does increase, but other factors—such as the quality of the house, the property’s location, and market trends—are equally, if not more, important in determining how a property’s value will change over time.

So, What Property Should You Buy?

Ultimately, the key takeaway is this: when buying property, focus on what fits your needs and aligns with your investment strategy. Don’t assume that a larger section will automatically give you better capital growth. If you're after a big backyard for personal reasons, go for it—but don’t expect it to be the best financial decision solely based on land size.

From an investment perspective, choosing the right property should be about balance. Look for a home that offers solid growth potential, a good location, and a layout that suits your lifestyle. The size of the land is important, but it doesn’t guarantee better returns.

In short, it’s not the land alone that drives a property’s value upwards—it’s the whole package. The house, the land, and the location all play a role in determining long-term growth. Larger land may not always lead to better capital growth, so make sure to consider all factors when making your property investment decisions.