It’s about optimization in that Unreal 5 demo, i don’t thinnk they rely only on hardware.
Unity already showcased how much they could push rendering using multi threading and their new ECS system.
And it was running in current hardware, not next gen.
About game engines i think it will always be about who is able to optimize the best.
This game will also benefit a lot from PS5 new hardware features ( perhaps a PC version and perhaps they will be able to bring old GPU skinning feature for characters as they look really bad without it )
No one is forcing, even Godot got Unreal grant.
It’s just lot of indies prefer the best support possible available, and the most tested and prooven engine to run with higher compatibility for consoles or desktop PC without big issues.
While about games i’m also not interested a lot in big production or open worlds, perhaps Horizon sequel but that’s almost all.
I prefer some high productions small indie games or some top Nintendo games that is unmatched about games entertainment.
Indeed many areas would need more work like just lot better AI with lot better behaviour; and better adaptation in dynamic game environments, and with lot less glicthes and bugs
Same for creation i don’t mind a lot about 3D engine able to display million polygons as like most indies i’m not making same games as big companies and high detailled levels is too long until you got the same procedural in house tools as the big companies uses, or same big teams
But perhaps beeing able to drop million polygons without LOD and no normal maps for some game creation will be cool to play with.
BTW, some games does not need high polygon count to shine