Why Australia’s Baby Boomers Aren’t Downsizing — And What It Means for the Housing Market

At Renown Lending, we often speak with families and first-home buyers about the frustrations of entering the Australian property market. One recurring question is: “Why aren’t more large family homes becoming available?”

A ‘silver tsunami’ might not be the answer to the housing affordability crisis, experts in the US have warned. Picture: NewsWire/Dylan Coker

New research suggests the answer isn’t stubbornness or greed from Baby Boomers—it’s a lack of sensible financial incentives and systemic disincentives that force older Australians to stay put.

According to an Australian Seniors survey, just 19% of empty nesters have downsized after their children moved out, leaving a significant number of under-utilised homes across the country. By contrast, 69% have held onto their family homes, often located in well-established suburbs ideal for younger families.

The Pension Trap: Why Selling Could Cost Them

Financial adviser Helen Baker explains the main issue: the age pension assets test. While the family home is exempt from the test, any leftover funds from selling the property—such as a $1 million windfall from selling a Sydney home and moving to a regional centre—are counted as assessable assets. That means retirees could lose access to the pension or receive reduced payments.

So rather than ‘freeing up’ equity, many older Australians feel penalised for making financially responsible decisions. They’re holding onto their homes not because they want to, but because they feel they have to.

Emotional and Practical Barriers to Moving

But it’s not just about the money. Social researcher Mark McCrindle highlights the emotional pull of the family home. “This is where they raised their kids,” he says. “To leave that space is to close a major chapter of life.”

Even with strong financial logic, that emotional hurdle remains. Stamp duty, high transaction costs, and a lack of suitable alternatives for retirement living only add to the reluctance.

Unlocking Supply Through Smarter Incentives

The Retirement Living Council estimates that nearly 60,000 homes could be unlocked if more retirees felt confident to downsize. The potential impact on easing housing supply constraints—particularly in capital cities and popular school zones—could be significant.

Executive director Daniel Gannon rightly calls current settings a “financial trap” for older Australians. We agree. It’s time for governments to revisit policies that support “right-sizing” rather than punishing it.

The federal government’s superannuation downsizer contribution is a good start, allowing eligible Australians aged 55 and over to contribute up to $300,000 to super from selling their home. But more needs to be done to address stamp duty, pension rules, and the availability of high-quality retirement living.

Is the ‘Silver Tsunami’ a Real Solution?

In the U.S., economists have warned that an influx of downsizing Boomers won’t automatically solve housing shortages because those homes may not be in high-demand job-rich areas. Australia faces similar challenges.

Finder’s “Downsizer Index” shows cashed-up Boomers chasing the same sea-change and tree-change regions as Millennial buyers. Places like Main Beach on the Gold Coast are hot spots, where retirees and first-home buyers compete for limited stock.

So even if Boomers do start downsizing en masse, we may not see immediate relief in inner-ring city suburbs.

Final Thoughts from Renown Lending

At Renown Lending, we believe addressing the downsizing dilemma is key to solving the broader housing crisis. It’s not enough to build new homes—we need smarter ways to reallocate existing ones. That means giving older Australians the financial security and confidence to move without penalty.

Whether you’re a retiree looking to unlock equity, a family hoping to upsize, or a first-home buyer trying to get your foot in the door, our team is here to help with funding solutions tailored to your goals.

Contact us today on 1300 626 771 or visit www.renownlending.com to explore how we can support your financial journey.