The Downsizing Australia Report found four in five over 55s live in one- or two-person households compared to 41% of 25-54-year-olds.
The report is based on the results of a survey commissioned by REA Group and over 55s communities business GemLife.
The abundance of spare bedrooms in older households indicates many older Australians remain living in their family homes.
By comparison, a third of 25-54-year-olds have two or more spare bedrooms.
Yet the report said smaller homes suitable for downsizers - one-to-three bedroom units and houses - accounted for less than half of homes built between the 2016 to 2021 Censuses.
REA Group senior economist Angus Moore said as Australia's population continues to age, the types of housing provided will need to change.
"Older households are smaller but much of our existing housing stock and the housing we build is still large, detached homes that may be better suited towards larger family households," he said.
"Encouraging older and smaller households to downsize will be critical for ensuring we meet the needs of our aging population and use the housing we currently have more efficiently."
See also: Should you downsize? The pros and cons
Downsizing barriers
The survey found the two key drivers for those looking to downsize are lower maintenance (34%) and retirement (29%).
But prospective downsizers identified the main barriers as the "hassle of moving" (31%) and being emotionally attached to their current home (24%).
Nearly a quarter (23%) said they hadn't found a smaller home that suited their needs.
GemLife managing director and CEO Adrian Puljich said the key to motivating older Australians to downsize is in providing purpose-built homes.
"Many older people stay put because there is a lack of suitable housing for their over 50s and beyond, but struggle to maintain often large, ageing family homes," he said.
"When there are appealing alternatives ... we see they are willing to downsize, and often wish they had done it sooner."
Drivers of downsizing
As well as lower maintenance living, the survey found 11% downsizers are driven by sea- or tree-change with being close to the beach (22%) and bushland or national parks (23%) key criteria.
It also found downsizers place greater emphasis on sustainability with 55% regarding solar energy and water systems as key property features, compared to 39% of all buyers.
Two-thirds said they would stretch their budget for certain features or amenities.
Priorities included a suitable number of bedrooms (72%), having a garage (62%), and natural light (50%).
Downsizing solutions and issues
Mr Puljich nominated land lease communities as one solution to encouraging older Australians to move to more suitable homes.
These are housing models where buyers own their own homes but lease the land it sits on, paying regular fees that often include maintenance and groundskeeping.
Other retirement village models may see residents lease their dwellings as well on a guaranteed buyback arrangement (usually for a pre-determined price) when they leave.
Three in five survey respondents said they would consider moving into an over-50s lifestyle or retirement community.
See also: Should I buy into a retirement community?
But around half (47%) don't like the idea of living in an age-restricted community while 45% worry about ongoing fees and resale or investment risk (36%).
Read the fine print
In July, a Victorian tribunal ruled exit fees charged by one land lease community provider did not comply with the law.
The Victorian Civil and Administrative Tribunal found while exit fees, also known as deferred management fees, were legal, it was a breach of tenancy laws not to disclose what those fees would be to residents.
The case concerned publicly listed company Lifestyle Communities.
In July, GemLife also listed on the Australian Stock Exchange, raising $750 million in its Initial Public Offering (IPO), the largest for 2025 so far.
Over-55s housing is a rapidly expanding market sector estimated to be generating between $7-9 billion a year in revenue.
It is largely overseen by state and territory governments under their own legislation.
Downsizer incentives
The federal government has also recognised the benefits of older Australians selling their family homes, offering downsizer incentives.
Australians aged 55 and over can contribute $300,000 each to their superannuation from the sale of their family homes, provided they have owned them for at least 10 years.
Some states and territories also offer stamp duty concessions to eligible downsizers or retirees.
Property analysts, including the Downsizing Australia Report, regularly identify stamp duty costs as another deterrent to older Australians moving to more suitable housing.
See also: Stamp duty hike sees home sales fall
The report concludes downsizers must feel their new property is an upgrade, not a compromise.
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