More than 1.6 million Australian households intend to downsize over the next five years - a 30 per cent jump from 12 months ago - in a shift driven by Australia’s ageing population and the desire to release home equity.

Consumer research and advice company Digital Finance Analytics has released new results from its rolling survey of 52,000 households.

The company has found that there are 1.62 million households across Australia that want to downsize, an increase from 1.2 million a year ago.

Suburban Melbourne regions dominate the list of areas where these households are located. The Digital Finance Analytics research finds that Melbourne’s South East, West and Outer East were the top three regions to contain potential downsizers. 

This was followed by Perth’s North-West, the Newcastle and Lake Macquarie region in NSW and then Melbourne’s North East and North West.

Digital Finance Analytics principal Martin North said the heightened interest in downsizing - also known as rightsizing - was being driven by population demographics and economic factors.

He said current low returns from investment property and term deposits meant homeowners were seeking to access home equity accumulated over recent years. 

At the same time, Mr North said the current rising demand for property, and the resultant jump in prices, has made the downsizing transaction more attractive.

A further driver is Australia’s ageing population, which means there are more ‘empty nesters’ left in the suburbs who are keen to seek a new lifestyle and also cater for their health.

Most downsizers looking to buy under $1 million  

The Digital Finance Analytics research found around 40 per cent of downsizers intend to sell a three bedroom house, with 31.9 per cent ready to offload a four bedroom house. Seven out of ten downsizers are looking to buy a home valued under $1 million.

Mr North said the figures showed a significant number of large family properties would be coming on the market due to downsizing.

“The overall value of the transactions over five years is estimated to be worth $1.6 trillion dollars (up from $1 trillion when we last ran this analysis) and the total wealth extracted from the market, in net terms, is more than $300 billion,” Mr North said.

The average equity released on the transaction is around $310,000 for other investment or retirement, though this does vary by location, with some over $1.5 million.

“These statistics are going to have a considerable impact on the state of the market – especially at the upper end of the market.”

A total of 69 per cent of potential downsizers were aged 60-70, with 17.5 per cent being above 70 and 11.6 per cent being 50-60.

Comment from our CEO CEO Amanda Graham said the findings showed that downsizing had a stronger value proposition following the worst of the COVID pandemic in Australia last year.

“Last year published a research paper, based on a survey of our consumers, which showed that COVID had illustrated the benefits of downsizing to consumers,” Ms Graham said. 

“This included over 50s being able to expand their social network and avoid loneliness by moving into retirement communities, or to be closer to family or preferred lifestyle locations.

Since that time, the strong property market and a desire to release home equity funds during a time of low investment returns have turbo-charged interest in downsizing.”

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