Unlocking home equity for seniors may not be the sexiest proposal around but it is one of the smartest and will help save the budget from full-scale blowout, according to new research released by the Property Council of Australia.

A new report by Grant Thornton shows that the 184,000 older Australians currently living in retirement villages save the Federal budget $2.16 billion through delayed entry to aged care and reduced public health and care expenditure.

The report shows that with the increase in the seniors population and a higher percentage of seniors forecast to move into retirement living, there will be a doubling in the number of residents wanting to live in a retirement village by 2025, up to 382,000 people.

Removing the disincentive for pensioners to downsize from their existing homes through tightly targeted aged pension reforms, would, on indicative estimates calculated by PwC, save the government $86 million p.a. where those people chose to move to a retirement village.

"This simple change would increase savings to the budget significantly as a population ages" said Chief Executive Ken Morrison.