Global property group Colliers' 'Aged Care 2024' report states there is a strong case to invest in the sector due to the aged care bed "supply gap", but an uncertain legislative and funding future and slow development approvals may continue to constrain investment so growth must come elsewhere.
The report, which Colliers prepared with Darren Lynch, Principal Consultant of aged care management consultants Boxwell and Co, shows that in FY22-23 the net increase in aged care beds was 1,502 - well below the 6,000-plus achieved in FY17-18 and FY18-19.
As a case in point, Australia's last remaining ASX-listed aged care provider Regis Aged Care has not opened a new aged care home in more than five years, the report states.
In New South Wales, the number of beds actually dropped by 581 due to home closures and lower rates of development largely due to the "considerable" time it takes to get development approval.
The FY22-23 bed increase was less than 0.7%, compared to a 3.1% increase in the number of people aged over 80 years. From those figures there is an implied shortfall of about 5,300 aged care beds in Australia, according to Colliers.
Funding uncertainty
The aged care funding model must be clarified and improved in order to provide enough residential aged care beds to meet demand from the ageing population, particularly given the long development time frames, which Colliers puts at four years, but at The Weekly SOURCE, we believe it is closer to seven years.
"The funding model continues to be inadequate to encourage significant new growth," the report states.
"To encourage development, those providing the capital and taking on the risk require a development margin and appropriate return."
Providers "pivoting"
Aged care operators are "pivoting" their strategies with "increased urgency", including selling older and less efficient sites, concentrating geographically, and co-locating aged care within retirement villages.
The sector is likely to continue seeing the consolidation of larger operators pursuing growth through acquisition, while smaller operators close in the face of financial and regulatory challenges, according to Colliers.
However, the rate of consolidation will be constrained by the ability of providers to integrate, both culturally and systemically, the report predicts.
A turning point
The report describes the sector as at a turning point. Where it was previously in a 'cottage to corporate' stage, it is now closer to being in a phase of 'consolidation and innovation'.
Australia is well placed to be a global leader in this segment, the report states. Technology platforms such as Hayylo, Umps Health, Medistays, and Music Health are capable of increasing their scale, and there is increasing awareness and recognition of Australia's ageing community.
Download the report here.
