Research from UNSW Canberra suggests that while rate changes can shift affordability in the short term, deeper forces may shape housing markets over the long haul, namely Australia’s ageing population.
Many Canberrans are welcoming the Reserve Bank of Australia's (RBA) recent rate cuts after years of rate hikes, hoping for relief in one of the country’s most expensive housing markets.
But research from UNSW Canberra shows why demographics, not just RBA decisions, drive housing affordability in the ACT.
A study co-authored by Professor Satish Chand from the UNSW Canberra School of Business explores how demographic change affects the supply and demand for housing.
Using a model that tracks how different generations buy, hold, and sell property over their lives, the research reveals that ageing can push prices up in some periods and pull them down in others.
“Interest rates dominate the headlines, but the real story in Canberra’s housing market is demographic,” Professor Chand says.
“An ageing population will influence demand for decades to come, and we need to start planning for that now.”
The research shows two competing trends at play:
Fewer young people entering the market means fewer buyers and downward pressure on prices.
Longer life expectancy means older people hold onto homes for longer, which can restrict supply and keep prices high.
Additional considerations for Canberra and Australia include the impact of migration, both national and international, which can either amplify or soften these pressures depending on inflows to the ACT and other urban centres.
Compounding this is the recently introduced 5% deposit guarantee for first-home buyers, which is expected to bump up demand.
While this initiative aims to help more Australians get their foot in the door, Professor Chand warns it may have the unintended effect of pushing prices higher, leaving new homeowners facing steeper repayments.
“It can make entry easier, but it doesn’t change the underlying affordability challenge, so we risk ending up in the same position, just with more debt,” he explains.
The research also notes a stagnant market for houses owned by the elderly, who often have little incentive to downsize or move into retirement homes. This further tightens supply in established suburbs and delays the natural turnover of housing stock.
The result? Housing markets are likely to experience turning points: periods where prices first rise as people live longer, then soften as fewer young buyers enter the market.
The model also highlights that not all housing assets are equal. Land values are especially sensitive to falling populations, while building values may hold steady or even rise as older households demand higher quality housing.
“It’s not just about whether prices go up or down. It’s about which parts of the market shift. Land and construction prices may diverge, and that matters for planning, taxation, and policy,” Professor Chand says.
For a city already grappling with affordability pressures, the research points to significant long-term implications.
Policymakers may need to consider not just how interest rates influence affordability, but how demographic shifts will reshape demand in suburbs, rental markets, and aged care housing.
“Lower rates give households short-term breathing space, but if we ignore the demographic headwinds, affordability challenges will simply resurface in another form.”