By Adrian Janiszewski, Senior Project Manager at MakeSpace | Housing advisory and project delivery for community, affordable and specialised housing providers

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Australia's ageing population is already reshaping demand for aged care and retirement living at a pace the development sector is struggling to match. The population aged 65 and over is projected to grow from 4.31 million in 2021 to 6.66 million by 2041, while the 85-plus cohort (the group most likely to require residential aged care) is projected to more than double over the same period. For aged care operators, retirement living providers, not-for-profit housing organisations, and purpose-driven developers working in this sector, understanding the scale and shape of that demand is the starting point for making sound development decisions.

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How is Australia's ageing population reshaping demand for aged care and retirement living?

The demographic shift underway in Australia is not driven by economic conditions or consumer sentiment. It is driven by the age profile of a population that is already here. The people who will be 75 in 2030 are already in their mid-60s.

Australia's population aged 65 and over is projected to grow from 4.31 million in 2021 to 6.66 million by 2041, an increase of 54%. Growth is steepest at the oldest ages: the 85-plus cohort is projected to more than double, from 534,000 in 2021 to 1.28 million by 2041, an increase of approximately 140%. Australians aged 75 and over will surge from 2.1 million to 3.2 million by 2035, creating heightened demand for age-friendly and accessible housing.

This matters for development planning because the 75-plus cohort is the primary market for retirement villages and independent living communities, while the 85-plus cohort drives demand for residential aged care. Both cohorts are growing simultaneously, and the 85-plus group is growing faster. That means aged care supply shortfalls will intensify, while the level of care needs among residents entering retirement living communities will also rise over time as people age in place.

Baby Boomers, born between 1946 and 1964, are now moving through their 60s and 70s in significant numbers. They are, broadly speaking, the wealthiest and most active generation of retirees Australia has seen. They have benefited from decades of capital growth on family homes and bring higher expectations for what retirement living should deliver. Meeting those expectations across design, lifestyle amenity, and the care continuum is where housing demand in this sector is heading.

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What does the supply gap look like across residential aged care and retirement living in Australia?

The gap between supply and housing outcomes for older Australians is widening across both parts of the sector.

Retirement living and independent living

Residential aged care and retirement living represent the largest and most complex forms of specialised residential accommodation in Australia. The senior living sector collectively holds approximately 500,000 places, of which around 430,000 are in retirement villages and aged care facilities.

The national penetration rate for retirement villages sits at approximately 5.0–5.7% of the 75-plus population. Even if that rate remains constant, demographic growth alone requires approximately 8,500 new independent living units (ILUs) per year over the next decade just to maintain the current proportion of the population being served. The retirement village sector is facing a supply shortfall of approximately 49,000 ILUs by 2030. This figure has been revised down from earlier estimates as some pipeline projects have progressed, but it still represents a significant structural gap.

Residential aged care

The aged care supply picture is more acute. Australia had approximately 223,691 operational residential aged care places as of 30 June 2024, equivalent to approximately 68.8 per 1,000 people aged 70-plus. The historical planning benchmark used for many years was 78 places per 1,000. The Australian Government revised its official target down to 60.1 per 1,000 in 2023, which Australia's current supply broadly meets on paper. With the 85-plus cohort set to more than double by 2041, however, the adequacy of that revised target is itself being questioned.

Between 2020 and 2025, the number of operational aged care places increased by just 3%. Over the same period, the population of Australians aged over 85 (the group most likely to require residential aged care) grew by more than 12%. — National Seniors Australia, March 2026

In 2025, only approximately 800 new residential aged care beds were added nationally against an estimated requirement of approximately 10,600 annually. Sector-wide aged care occupancy reached approximately 94% in late 2024, according to the December 2024 Aged Care Financial Performance Survey, with many of the remaining unoccupied places unavailable due to staffing shortages, refurbishments, or remote locations where local demand is low. As of late 2025, nearly 2,500 elderly patients across Australia were medically cleared to leave hospital but could not be discharged because no aged care bed was available.

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Retirement villages vs land lease communities: how are the two main seniors housing models responding?

Understanding the distinction between the two primary models is important for any operator or developer making decisions about what to build and for whom.

Sources: JLL Seniors Living research; CBRE — Land Lease Communities

The retirement village sector remains the larger of the two models by number of places. However, land lease communities (LLCs) are growing faster, and their simpler financial structure (no exit fee, full capital gains retention, potential Rent Assistance eligibility) is attracting a broader range of retirement living operators and investors. There are currently more than 40,000 operational LLC sites nationally, with a further 15,000–20,000 sites under development.

Institutional capital is entering both models. The Australian senior living sector is nearly four times the size of the student housing market and ten times the size of the build-to-rent sector, yet still has low levels of institutional ownership, representing significant consolidation potential. At least nine retirement village transactions exceeding $100 million have occurred since 2021, and Invesco's $845 million acquisition of RetireAustralia in 2025 signals the scale of capital now committed to the sector.

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What is driving the shift toward independent living, wellness-led retirement communities and ageing in place?

Baby Boomers entering retirement are reshaping what the sector needs to deliver. This is the generation that redefined consumer expectations across every industry it moved through, and retirement living is no different.

The shift is away from the traditional care-only model toward wellness-led retirement communities: high-quality clubhouses, gyms, pools, dining options, social programming, and a genuine sense of community. Independent living continues to dominate the seniors living market, capturing approximately 59.8% of market share in 2024. Memory Care is the fastest-growing segment, with a projected compound annual growth rate of 8.43% through 2030, driven by rising dementia prevalence among the ageing population.

Independent aged care - where residents maintain autonomy and make active decisions about their care pathway rather than moving into full residential care - is reshaping how communities are designed and operated. The expectation of ageing in place is now a primary driver of development decisions: communities need to offer a genuine care continuum, from independent living through to supported care, rather than requiring residents to leave when their needs change.

This is driving interest in vertical integration: retirement living operators increasingly look to co-locate independent living units with on-site aged care facilities, or to partner with aged care providers to offer seamless transition pathways. The Federal Government's Support at Home scheme, active from November 2025, is also reshaping how in-community care is funded, with quarterly budget allocations across eight need levels that affect what on-site care models within retirement communities need to provide.

State governments across Australia are increasingly treating seniors living supply as both a housing and a health system issue, recognising that expanding aged care and retirement living capacity reduces pressure on public hospital beds and frees up larger family homes for younger buyers.

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Where is aged care and retirement living demand concentrated and how does geography shape development decisions?

Demand is not uniform across Australia. Sound development decisions in this sector require local housing development demand analysis: understanding not just how many older Australians live in a given area, but how many age-appropriate housing options already exist and what the gap looks like.

New South Wales and Victoria have the largest absolute numbers of older Australians and are also the most supply-constrained, with land availability and feasibility pressures limiting new development. Queensland and Western Australia attract strong demand from internal migration: retirees relocating for lifestyle and climate reasons add to existing local demographic growth, creating concentrated demand in coastal and lifestyle-oriented markets.

The land lease community model has found particular traction in regional and lifestyle markets where land costs are lower and the LLC financial structure suits downsizing retirees. In supply-constrained urban markets, vertical development is increasingly common as the only viable way to add significant volume.

For any development decision in this sector, the starting point should be a clear assessment of where the 75-plus and 85-plus populations are located, what aged care facilities and retirement living places already exist within a reasonable catchment, and what the pipeline looks like. The gap between those numbers is where genuine opportunity sits.

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How MakeSpace supports aged care operators and retirement living providers through delivery

The demographic case for developing in this sector is strong and well-evidenced. The delivery challenge is equally real.

For aged care operators, retirement living providers, not-for-profit housing organisations, and purpose-driven developers, translating demographic opportunity into a viable, well-delivered project requires more than market confidence. It requires rigorous housing project feasibility, sound procurement decisions, project risk management that accounts for the regulatory complexity of the Aged Care Act 2024 reforms, and delivery governance that keeps the project aligned with operational reality through to handover.

Aged care development and retirement living accommodation delivery are among the most technically and operationally demanding forms of housing project delivery in Australia. Getting them right means understanding not just how to build, but how the building will be used: by residents, care teams, and facilities managers, for decades after practical completion. That operational understanding needs to shape decisions from feasibility through to design, procurement, and construction.

MakeSpace works with aged care operators, retirement living providers, community housing providers, and purpose-driven developers as a specialist housing advisory and delivery partner across these projects. We support housing project feasibility, procurement strategy, and construction oversight, helping ensure delivery risk is identified and managed before it becomes a problem on site.

For a closer look at how feasibility pressures and supply dynamics are shaping retirement living project delivery, our blog on the retirement living supply gap and what it means for delivery covers this in detail. For the design and operational considerations specific to residential aged care, our blog on aged care project delivery is a useful companion read.

If your organisation is planning or progressing an aged care or retirement living development and would find it useful to talk through the delivery considerations, we would welcome that conversation.

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Frequently Asked Questions (FAQs)

What is the penetration rate in Australian retirement living and why does it matter?

The penetration rate is the share of the target population living in age-specific communities. For retirement villages, it currently sits at approximately 5.0–5.7% of the 75-plus population. For land lease communities, it is approximately 1.0–1.5% of the 55–85 age group. Even if these rates stay constant, Australia's projected demographic growth means approximately 8,500 new seniors living units are needed annually over the next decade just to maintain the current proportion of the population being served. Current development pipelines are not delivering at that rate, which means the housing supply gap for older Australians is widening.

What is the difference between a retirement village and a land lease community?

In a retirement village, residents hold a long-term lease or licence and pay an entry price below local market value, plus a Deferred Management Fee (DMF) on departure. In a land lease community, residents own the physical dwelling but lease the land from the operator, pay site fees, and are not subject to exit fees. LLC residents may also be eligible for Government Rent Assistance and retain 100% of capital gains when they sell. The LLC model is growing faster than the traditional retirement village sector and is attracting significant institutional capital due to its simpler financial structure.

How severe is the residential aged care supply shortage in Australia?

According to GEN Aged Care Data, Australia had approximately 223,691 operational residential aged care places as of 30 June 2024, equivalent to approximately 68.8 per 1,000 people aged 70-plus. The Australian Government revised its official target to 60.1 per 1,000 in 2023, which current supply broadly meets. With the 85-plus cohort projected to more than double by 2041, however, the adequacy of that target is increasingly questioned. In 2025, only around 800 new residential aged care beds were added nationally against an estimated annual requirement of approximately 10,600. Sector-wide occupancy reached approximately 94% in late 2024, with many remaining places unavailable due to staffing or location constraints.

Why is institutional capital entering the aged care and seniors living sector?

Seniors living is increasingly viewed as a defensive, income-secure asset class. Demand is driven by demographic factors rather than economic cycles. The number of older Australians requiring housing and care will grow regardless of market conditions. The sector also has historically low levels of institutional ownership, creating significant consolidation potential. Recent transactions include Invesco's $845 million acquisition of RetireAustralia in 2025 and at least nine retirement village deals exceeding $100 million since 2021. CBRE notes that the senior living sector is nearly four times the size of the student housing market and ten times the size of build-to-rent.

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Sources: JLL Seniors Living research; CEPAR/UNSW — New population projections for Australia 2021–2041; ULI Australia 2025; AIHW — Aged care; GEN Aged Care Data — People using aged care; National Seniors Australia — Aged care under pressure (March 2026); Aged Care Online — Why Australia can't keep up with demand for residential aged care beds; CBRE — Australian Seniors Housing; CBRE — Land Lease Communities; CBRE 2026 Seniors Living Report via Commo; Mordor Intelligence — Australia Senior Living Market 2025

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Last updated on June 14, 2026