Australia’s retirement living and aged care sector faces growing supply crunch as demand surges
Australia’s ageing population is creating sustained demand for retirement accommodation, yet higher construction costs, inflation, rising compliance obligations and increasing workforce costs are limiting the delivery of new projects.
Mitchell EnrightDirector, Health & Aged Care at M3 PropertyOur latest report is out now, delving into Australia’s retirement living and aged care property sector.
The sector is entering a period of unprecedented demand, but a shortage of new supply risks leaving the market unable to meet the needs of an ageing population, according to new research by M3 Property.
The report, Retirement Living and Aged Care Property Sector Insight – August 2026, highlights that Australia’s over-65 population is projected to increase from 4.75 million today to approx. 7 million by 2040. This is creating substantial demand for retirement villages, residential aged care facilities, seniors living facilities and land lease communities. At the same time, affordability dynamics and constrained new supply are influencing occupancy, pricing and development feasibility across the market.
Mitchell Enright, Director, Health & Aged Care at M3 Property said the sector is experiencing a structural imbalance between supply and demand that is expected to intensify over the coming decades.
“We are seeing strong demographic tailwinds supporting the retirement living sector, but new supply is not keeping pace with demand,” said Mr Enright. “Australia’s ageing population is creating sustained demand for retirement accommodation, yet higher construction costs, inflation, rising compliance obligations and increasing workforce costs are limiting the delivery of new projects.”
In 2025, the aged care and retirement living property sectors recorded $5.29 billion in sales across 58 transactions. This included the $3.85 billion sale of the Aveo retirement village portfolio from Brookfield Asset Management to The Living Company, which was the largest direct real estate transaction in Australian history. Activity has been slower so far in 2026, with $229.6 million recorded across 31 transactions, indicating a quieter market compared with 2025.
The sector is also seeing significant consolidation among operators, with the number of operators declining by 0.9% between 2024 and 2025 and the number of retirement aged care facilities declining by the same amount. Despite this, vacancy rates are decreasing, and this, combined with the lack of new supply, is putting pressure on available capacity.
A large sector with supply that falls short
Taken together, Australia’s retirement villages (approx. 210,000 independent living units) and residential aged care sector (approx. 224,000 places) represent one of the country’s largest specialised property sectors. Industry estimates suggest Australia will require up to 97,000 additional retirement village units over the next two decades, yet only around 2,000 to 2,500 are currently being delivered each year.
The supply challenge is being compounded by elevated construction costs, labour shortage, inflationary pressures and increasing regulatory obligations. These factors have widened the gap between replacement costs and asset values, making many new developments difficult to justify financially.
View the full report Retirement Living and Aged Care Property Sector Insight – August 2026
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