When 13 million rooms sit empty, Australia's housing problem may be less about building more and more about moving people.
Australia’s housing shortage is one of the biggest economic debates of the decade. But former Commonwealth Bank chief economist Michael Blythe has a provocative counter-argument: Australia’s downsizing dilemma is at the heart of the problem. Census data shows 13 million bedrooms currently lie empty across the country, locked up in large family homes by older Australians who face too many barriers to moving. If that stock were freed up, it could take significant pressure off the housing market without building a single new home.
The 13 million bedrooms
Australia’s last census confirmed what many housing researchers have long suspected: a massive mismatch between where bedrooms are and who needs them. Blythe, now economist-in-residence at downsizer.com, puts the number at 13 million unoccupied rooms across the country, owned by older Australians who remain in homes that are far larger than their daily needs.
At the same time, data from the platform shows 1.9 million Australians say they are actively looking to downsize, while a further one million are looking to upsize into bigger homes. The demand exists on both sides of the ledger. The problem is that the market is not moving.
The logic is compelling. If even a fraction of those underoccupied large homes changed hands, it would open up housing for families who genuinely need more space and could ease price pressure in sought-after suburbs across every capital city. The question is not whether people want to move. It is why so many of them are not.
Stamp duty barrier
Stamp duty is the single biggest financial disincentive for people who want to move. For an older homeowner selling a large family home and buying a smaller property, stamp duty on the new purchase can run to tens of thousands of dollars. That cost, layered on top of moving expenses and the emotional weight of leaving a long-held home, tips the balance toward staying put.
If you are thinking about buying a downsizer property, it is worth calculating your stamp duty costs before you set your budget. The amounts vary significantly by state and property price, and can come as a surprise to buyers who have not moved in many years.
Some states have already recognised the problem. Stamp duty exemptions available to older buyers in NSW offer partial relief for eligible downsizers, and stamp duty reforms for first home buyers in South Australia show what targeted concessions can achieve when governments choose to act.
Blythe argues that stamp duty concessions specifically targeted at downsizers could unlock significant supply. Belle Property chief executive Nick Boyd has gone further, floating a 25 per cent concession across all stamp duty to get more people moving at every stage of life.
The supply problem
Even if stamp duty were reduced, another barrier would remain: the wrong type of housing is being built.
Belle Property’s Nick Boyd has pointed out that many older Australians are simply not willing to trade a five-bedroom family home for a small inner-city apartment. They want space. They want a courtyard or garden. They want to stay close to friends, family and the community they have lived in for decades.
HILDA survey data supports this observation: 36 per cent of people who move in Australia stay within the same postcode. Any strategy to encourage more downsizing has to offer housing that actually appeals — villas, townhouses, well-designed two-bedroom apartments with storage and outdoor space, in the same neighbourhoods people already know.
A 2025-2026 Productivity Commission report added a further dimension: red tape including zoning laws and council regulations can add as much as $320,000 to the cost of building a new home in Australia. Cutting that regulatory burden would make it commercially viable to build more of the mid-sized, quality housing that downsizers actually want — and keep it within a price range they can afford.
Super incentives few use
There is an existing financial incentive for downsizers that almost nobody knows about.
Since 2018, Australians who sell a family home can contribute a portion of the proceeds to superannuation outside the usual contribution caps. Singles can contribute up to $300,000 into super from the sale proceeds; couples can contribute up to $600,000. This is a significant tax advantage that lets downsizers convert home equity into a more tax-effective structure without triggering the standard cap limits.
Blythe notes that out of almost two million potential downsizers across Australia, only around 98,000 have taken up this concession since it launched. Awareness is low, and even among those who know about it, the mechanics and eligibility rules are not always clear. If you are an older homeowner thinking about your next property move, this super contribution option is worth discussing with a financial adviser as part of your overall plan.
Blythe also points out that many potential downsizers are asset-rich but cash-poor. They need to raise a 10 per cent deposit for a new home before their existing home sells. He argues that government deposit bonds should be more widely available for older buyers in this position — a practical fix that could unlock a significant number of moves.
What this means for buyers
If more downsizers can be encouraged to move, the flow-on effects for the broader property market could be significant. More large family homes coming to market in established suburbs gives families looking to upsize more options, and could ease competition — and prices — in the segments of the market that are most tightly held.
For anyone thinking about what you can borrow for your next property purchase, broader market dynamics around downsizing supply are part of the picture. More turnover in the market generally creates more options for buyers across every price point.
If you are a homeowner over 55 considering your next move — whether downsizing into something more manageable, freeing up equity, or simply relocating — it is worth speaking with a mortgage broker about the finance options available to you. The conversation is not just about how much you can borrow. It is about how to structure the transition in a way that works for your life.
Common questions
Q: How many empty bedrooms are there in Australia?
Census data shows approximately 13 million bedrooms currently lie empty in Australian homes. Most are in large family homes owned by older Australians who have not yet downsized. Economist Michael Blythe argues this underoccupied stock represents a significant untapped resource that could ease housing pressure if more people could be incentivised to move.
Q: What is the main reason downsizers are not moving?
Stamp duty is consistently cited as the biggest financial barrier. For an older homeowner buying a smaller property, stamp duty on the new purchase can run to tens of thousands of dollars. Beyond cost, a lack of suitable housing — specifically, quality mid-sized homes in familiar neighbourhoods — also deters many would-be downsizers from making the move.
Q: Is there a superannuation benefit available when downsizing?
Yes. Since 2018, eligible Australians who sell a family home can contribute up to $300,000 as a single, or $600,000 as a couple, into superannuation outside the normal contribution caps. Despite being available for several years, only around 98,000 people have used this concession. If you are considering downsizing, speak with a financial adviser and a mortgage broker to understand all the options available to you.