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According to the group, narrow lot designs will be one of the big trends the market will see next year and the government will work with the development industry to increase the number of homes in established urban and development areas.
“With smaller block sizes, it means more demand for innovative designs that don’t compromise on space,” Allworth Homes managing director Stephen Thompson said.
As well as narrow block designs, Allworth Homes predicts the knock-down rebuilds will continue to increase in 2016.
Mr Thompson said this comes as homebuyers are realising that rebuilding a brand-new home on their existing property is beneficial in the long run.
“We have seen a marked increase in the number of rebuild sites at Allworth Homes and are confident these numbers will keep rising in 2016,” he said.
“We believe this trend comes down to people crunching the numbers around associated costs relating to ‘moving’ compared to building ‘new’.
“Mixed with the fact that they are future-proofing the resale of their home down the track, it’s a clear winner as to why people are choosing to go down this road.”
Furthermore, Allworth Homes predicts buyers to begin “future-proofing” their homes for multigenerational living in 2016.
“A lot of new homebuyers are now following the trend toward 'future-proofing' their new home design,” Mr Thompson said.
“That is, designs that allow, with a small amount of renovation work, a former living area to be converted into sleeping accommodation with bathroom access, for example.
“Homes with versatile spaces that can be used in different ways and accommodate multigenerational living will continue to be in high demand in the coming years.”
Mr Thompson added that high land prices will continue to make it tougher for first home buyers to enter the market.
“This is an unfortunate reality that doesn't need much explanation,” he said.
“We are seeing a decrease in the amount of sites for first home buyers can afford in Sydney and with the reduction in the First Home Owners Grant, we expect those numbers to keep dropping.
“Good news is this may be short lived. With major land release planned and lot sizes decreasing, competition amongst developers should see land priced within the reach of first home buyers in Sydney late 2016-17.”
[Related: Commercial versus residential property]