With an estimated $12.5 billion required to build the 40,000 new aged care beds needed in the next five years, the reality is: it’s just not going to happen.
This week, we have been tuning into the public hearings for the Senate Inquiry into the Aged Care Bill 2024.
Among the evidence, it is worth noting that the Shadow Minister for Aged Care, Anne Ruston, has been closely questioning aged care CEOs on the cost to build an aged care bed – including the cost of capital, depreciation, operations and maintenance.
The conclusion? The testimony from operators confirms that it now costs upwards of $450,000 to $500,000 just to build a bed – add another 15 to 30% on top for regional areas.
Now consider this: StewartBrown Senior Partner Grant Corderoy forecasts another 40,000 aged care places will be needed in the next five years to meet demand.
That is $12.5 billion in cash that will be required according to our back-of-envelope calculations.
Where will this cash come from?
Are the banks and private equity prepared to front up this capital now? No.
While some larger operators are now getting long held projects off the ground, the fact is that the grandfathering of the Aged Care Taskforce’s funding reforms will mean another three years before the sector is in a financially sustainable position to encourage investment.
Are the planning systems ready? No.
We are still seeing a lack of State-based planning controls to incentivise new developments.
And it will be older Australians – and the younger generations – who suffer.
With the average home care hours sitting at just five hours a week, older Australians will be trapped at home without the support needed to age well.
Many neighbourhoods will become ‘grey ghettoes’ as families are forced to bridge the care gap.
This will also keep family homes that could be freed up to house younger generations locked away from the market.
Is there a solution?
Colliers’ Director, Advisory Services for Healthcare & Retirement Living, Bruce Message recently told our SATURDAY magazine that he is working to put together some financial instruments to provide investment capital for the aged care sector.
With the average aged care facility taking five years to get on the ground, can the sector afford to wait for private capital?
The Government has recently made $300 million available through the Aged Care Capital Assistance Program for new aged care homes and staff accommodation in rural and remote areas.
Will the Government need to come up with a new grant or loan scheme to incentivise the sector at large to build now?
With the sector short 6,600 beds alone last year, one thing is certain: the pressure is on.
