How the “sandwich generation” is shaping current and future housing – John McGrath

The Reserve Bank of Australia (RBA)’s 0.25% rate rise two weeks ago was largely expected by industry experts and lenders. But our first increase since November 2023 was unsurprisingly, not welcome news for home owners and buyers.

Cotality believes that while the lift to 3.85% won’t alter the immediate housing market balance, the outlook for the cash rate remains clouded. At the same time, the national Home Value Index has already risen by 9% since the rate cutting cycle began a year ago.

These statistics are significant, especially for sellers, but it’s Generation (Gen) X who stands to enjoy some of the biggest property benefits. So much so that this “sandwich generation” (aged 46-60 and caught between looking after parents living longer and children not leaving home) is already shaping current and future housing, including State and Federal policies.

We explore Gen X’s strong housing stance, and what this means for them and the market, in our McGrath Report 2026. As I’ve previously observed, Gen Xers have the largest housing portfolio of any generation and are the clear winner of the generational capital gains race.

But this generation’s impressive position, as well as concerns such as the continuing cost-of-living crisis, is resulting in a major societal change: increasingly high numbers of multi-generational households. Australia’s many different cultures, where such households are the norm, is another reason for this move.

An analysis of Australian Bureau of Statistics (ABS) data in June 2025 found one in five households is now multigenerational, up 22% from 2016. In addition, an Australian Institute of Family Studies survey, published in June 2023, showed the proportion of 19-year-olds living with their parents has lifted from 63% in 2006 to 72% in 2021.

Such numbers are only expected to rise in the future too. An evaluation of the ABS’ 2024 Household and Family Projections report showed multi-generational households is expected to be a prevailing model for at least the next 20 years.

These figures are resulting in one common issue: a growing desire for larger homes, which can support three generations under one roof. Think separate living areas, extra storage space, dual kitchens and bathrooms, and easy access to different storeys.

Unfortunately, such homes aren’t readily available. According to the Housing Industry of Australia (HIA) and ABS data in February 2025, the average size of Australian dwellings has been on a steady, though modest, decline over the past 15 years. More than 70% of new home constructions in 2022-23 were also apartments, rather than detached homes. And of course, Australia’s construction industry issues aren’t helping this situation.

At the same time, many housing developers are now acknowledging the high number of multigenerational households, and producing new, and larger homes for these people. Other developers offer the option of home designs to suit such families.

But it’s the recent government policy changes to granny flats that have changed the multi-generational real estate space the most. These new policies are making property life smoother and easier for Gen Xers and their family households while also adding significant value to properties and decreasing the pressure on our housing market.

This latter concern is one of the main reasons why governments are changing their tune on granny flats. In 2021, the Federal Government changed its laws to ensure granny flats could be set up for family members, without exposing the entire family home to capital gains tax.

Furthermore, in recent years, every state and territory government has streamlined planning and building approvals for granny flats, or has relaxed its legislation around these secondary dwellings. New rental laws in some areas have also enabled home owners to rent these dwellings to anyone. In other locations, homeowners can now subdivide their land, so they can demolish the family home and build two or more new dwellings for parents or children.

These government amendments are a big reason why builders expect to construct 10 times more granny flats in 2026, compared to 2022, according to a HIA survey in April last year.

There are many benefits to multigenerational living, and I’m looking forward to seeing more of these households in our property industry in the future. I certainly believe the number of these households will only increase.