Applications to build stand-alone aged care homes have dried up. This is a disaster waiting to unfold unless the Government and Opposition can reach agreement on the recommendations of the Aged Care Taskforce.
Last week, we reported that the value of aged care construction fell 5.6% to $3.6 billion in 2022-23, the third straight year of declines, according to the Government’s latest Financial Report on the Australian Aged Care Sector.
A ring-around this week has confirmed that the big banks have “next to nothing” in terms of stand-alone residential aged care developments on their books, with the only new developments to include aged care being campus-style models.
The dire state of new home builds is backed up by advisory firm Ansell Strategic’s new Board Pack for Q4 FY24 which has just been released.
Check out the graph above.
As you can see, RAC building activity has continued its steady decline, with just $2.2 billion of new development under construction last financial year.
“Our experience is that the number of new developments across the country has slowed down to zero, except some rebuilds that we’re doing in Victoria and South Australia,” Managing Director, Cam Ansell, told The Weekly SOURCE.
$300K-plus to build a bed; $200K to buy one
The drivers behind the lack of new development are clear.
With new beds now costing $300,000 to $400,000 and upwards to develop – before land and holding costs – and taking five years to build, those operators seeking growth are turning to acquisitions as a more cost-effective solution.
Case in point: private operator Infinite Care was revealed as the buyer of a former Estia Health home in Melbourne this week for close to $12 million – less than $200,000 per bed.
An increase in acquisition activity is not a solution to the fundamental problem.
The latest forecast from the Department of Health and Aged Care is that the country will need 400,000 beds by 2043.
Based on current projections, there will be a huge gap in available beds as Australia heads towards the peak of demand from the Baby Boomers.
Banks and operators want funding certainty
Already we hear from operators on a weekly basis that aged care homes in metropolitan areas are close to capacity or full and waitlists are building, particularly for newer rooms.
The lack of Home Care Packages is also driving people prematurely into residential aged care. As we also report this week, hospitals are continuing to struggle to discharge patients who should be in aged care.
Talking to operators and banks, they are keen to get on with the job of building new beds – when they have certainty about the Taskforce recommendations.
The Government has indicated they are well aware of the pressing need for a resolution on funding reform of the sector.
Federal Health and Aged Care Minister, Mark Butler told radio this week: “They [the Opposition] have been very constructive at trying to reach a bipartisan position on reform to aged care that leads the aged care sector to build all of the beds that we need, not just now, but particularly over the coming five or 10 years as the large baby boomer population starts to reach the age of residential aged care."
Will the Government, and the Opposition, answer the sector’s prayers and ensure Mums and Dads will have a place to care for them in the future?
More insights from Ansell Strategic’s Board Pack next Thursday.
