Going solo: The hidden reason why Australia needs more homes than ever
Changing demographics are exacerbating demand for certain types of housing
2 min
The rise in single person households is exacerbating the housing crisis — and it shows no evidence of slowing down, according to new findings.
Research by Ray White says the number of people living alone in Australia is on the increase and is impacting the volume and style of homes being built.
Data from the RBA and the ABS showed that more than one in four households in Australia now have just one occupant.
The average size of households increased during the early stages of the COVID-induced lockdowns as young people in particular returned to the family home. However, by the end of 2020, that trend started to reverse resulting in the average household size hitting a historic low of 2.48 people by August 2022.
Chief economist at Ray White, Nerida Conisbee said the results seem counterintuitive at first.
“With lockdowns frequently restricting visitation levels during the pandemic, it would have seemed intuitive that people would move in together to have company. The opposite however occurred. Rising wealth as a result of record savings rates led to more people moving out on their own,” she said.
“This higher demand for housing from more single person households led rents to rise even though population growth was very low.
“Given the opportunity (and the money), it appears that there is a strong preference for people to not be surrounded by too many people in their homes.”
The impact on the demand for increasing levels of housing has been significant.
“A rough calculation suggests that across the Australian population of more than 25 million people, a decline in (the Average Household Size) AHS of the magnitude observed between early 2020 and September 2022 (around 1 per cent, without any change in population growth) would alone imply an increase of around 120,000 households,” a report authored by Nalini Agarwal, James Bishop and Iris Day for the RBA said.
While the rising numbers of single person households may appear to be voluntary, Ms Conisbee said that it was not always the case. This was especially true for older Australians living in three or four-bedroom homes.
She said the existing housing stock was not keeping up with changing demographic needs.
“Australia is dominated by houses with three or more bedrooms,” Ms Conisbee said.
“Most households with just one person have more than two spare bedrooms. While there is likely a preference by some to have a lot of spare rooms, the reality is that finding a home with just one or two bedrooms is difficult unless you want to live in a high density area or in a high rise apartment building.
“There is a growing requirement for smaller medium density homes, particularly in inner and middle suburbs around Australia.”
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Strong consumer spending and tight supply have driven retail to the top of commercial property, but signs of pressure are starting to emerge.
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Australia’s retail property sector entered 2026 as the strongest performing commercial asset class, but rising geopolitical risks and cost pressures are beginning to test its resilience, according to new research from Knight Frank.
The latest Australian Retail Review shows the sector rode a wave of consumer spending and constrained supply through 2025, delivering total returns of 9.2 per cent and driving transaction volumes up 43 per cent year-on-year to $14.4 billion.
That momentum carried into early 2026, with around $3.6 billion in deals recorded in the first quarter alone.
“Retail clearly emerged as the standout commercial property performer in 2025,” said Knight Frank Senior Economist, Research & Consulting Alistair Read.
“Improving household spending, limited new supply and stronger leasing fundamentals combined to drive better income growth and renewed investor confidence in the sector.”
Spending rebound drives retail strength
A lift in household spending has been central to the sector’s performance. Consumer spending rose 4.6 per cent year-on-year to February 2026, supported by easing inflation and improving real incomes.
That shift flowed directly into retailer performance, with average EBIT margins across major retailers rising to 8.9 per cent in the first half of 2026, their strongest level in several years.
“Stronger consumer spending was critical in restoring momentum to the retail sector,” Mr Read said.
“Retailers have generally been better able to absorb costs, rebuild margins and support sustainable rental outcomes, particularly in higher-quality centres.”
Improved trading conditions also pushed leasing spreads up 4.2 per cent in 2025, reinforcing income growth and supporting capital values.
Geopolitical tensions begin to bite
But the outlook has become more complicated. The report warns that escalating conflict in the Middle East and its impact on fuel prices, supply chains and interest rates could weigh heavily on consumer spending.
“Higher fuel prices, flow-on cost pressures across supply chains, and recent interest rate increases are collectively squeezing household budgets, and early consumer sentiment data suggests confidence is already softening,” Mr Read said.
“While household balance sheets remain generally resilient, heightened uncertainty over future costs is likely to weigh on spending — particularly in discretionary categories — in the months ahead.”
The impact is already being felt in investment activity. While the year began strongly, transaction volumes slowed in March as investors paused amid the uncertainty.
“Early indicators suggest elevated uncertainty has already begun to affect the market. While retail investment enjoyed its strongest start to a year in a decade, with nearly $3 billion transacted by the end of February, activity stalled in March, as investors took a pause amid elevated uncertainty,” Mr Read said.
Solid foundations support medium-term outlook
Despite the near-term headwinds, Knight Frank maintains that the sector’s underlying fundamentals remain strong. Limited new supply, high construction costs and population growth are expected to continue supporting rental growth over the medium term.
“Retail has entered this period of uncertainty from a position of strength,” Mr Read said.
“Supply-side constraints, population growth and improving income fundamentals remain powerful structural supports for the sector.”
The report highlights several trends shaping the year ahead, including steady yields as interest rates rise, mounting pressure on tenant margins, continued outperformance of prime centres, the growing need for logistics integration, and risks linked to underinvestment in capital expenditure.
For now, retail remains a sector with momentum, but one increasingly at the mercy of forces far beyond the shopping centre.
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