Economists say 13 million empty bedrooms show downsizing is key to easing the housing crisis, opening new conversations for brokers and their owner-occupier clients.
Older Australians are sitting on 13 million empty bedrooms, a “bedroom glut” that could act as a pressure valve for the housing crisis and reshape conversations mortgage brokers have with older clients and aspiring first-home buyers.
Former Commonwealth Bank chief economist Michael Blythe argues the housing debate has focused too narrowly on building more homes, instead of unlocking underused stock that could better house younger families, Domain and The Daily Telegraph reported.
“The housing crisis is often framed as a supply problem, but there are so many homes already built which are lying half-empty,” Blythe, now economist-in-residence at Downsizer.com, said. He points to downsizer.com data showing about 1.9 million people are looking to downsize, compared with around one million looking to upsize.
Nearly two million Australians are considering or talking about downsizing, yet relatively few are making the move, leaving a large pool of bedrooms tied up in family homes long after children have left. Blythe notes that well over half of potential downsizers have one or two people living in dwellings with three or more bedrooms empty.
Many older owner-occupiers have “ended up asset rich and cash poor and living in these older dwellings which are increasingly inappropriate as [they] age further.” Blythe said.
He argues that shifting support from grants that fuel demand for first-home buyers towards incentives for downsizers could free up larger dwellings without pushing prices higher.
Stamp duty remains a major barrier to movement. Blythe and other industry figures argue that transfer costs deter people from selling and buying again, whether they are first-home buyers, upgraders, or potential downsizers.
“Stamp duty is a huge disincentive for people to move,” he says, suggesting that targeted concessions for downsizers could free up larger homes for younger households and improve overall housing utilisation. He points to the recent removal of stamp duty in South Australia as “absolutely the way to go” to help the process.
Product design is another constraint. Many older Australians are reluctant to swap a four or five-bedroom house for a compact apartment that does not fit their furniture, lifestyle, or visiting family. Blythe says many downsizers “don’t want tiny two-bedroom apartments, they want something with a bit more space”, reflecting demand for larger, well-located options close to existing communities and transport links.
Existing policy levers, such as the downsizer superannuation contribution scheme, are not being fully utilised. Since 2018, eligible sellers over 55 have been able to contribute up to $300,000 each from sale proceeds into superannuation, outside normal caps, yet only about 98,000 people have taken it up out of nearly two million potential downsizers.
Blythe argues that better awareness of such options, combined with more suitable housing stock and streamlined transaction costs, could “get those downsizers moving” and ease pressure on first-home buyers and renters navigating high mortgage rates and tight vacancy.
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