Aged care in the spotlight amid $33bn building boom

This will be particularly evident as the baby boomer generation goes through the significant transition to retirement.

In March an unprecedented value of building work was approved in the construction of aged-care facilities, totalling $340 million in the month.

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Australia’s population aged 65 and older is estimated at 3.7 million by the Australian Bureau of Statistics. About 5%, or about 184,000 Australians, are living in retirement communities.

Based on present projections, Australians aged 65 and older will make up more than 20% of the population in 10 years.

Despite a rapidly ageing population, the reality of developing aged accommodation — particularly retirement villages — is harsh.

Like many assets, growth in the residential housing market has crowded out capital for aged accommodation.

According to a 2016 joint survey by the Property Council of Australia and Retirement Living, the national average price of a standard two-bedroom independent living unit increased just more than 3% between 2015 and last year.

In the same period, CoreLogic data shows national standard dwelling prices increased 7.3%.

Ryman Healthcare’s artists impression of its aged care centre on Brandon Park Drive in Wheelers Hill. Source: Supplied

Competition for vacant land, age-friendly regulation compliance and investment into green technology to reduce long-term service fees are factors that can inflate initial investment. This is amplified by the average tenure in retirement villages, which is about 12 years.

But some areas across the country lend themselves to aged-care development.

Advantages such as relatively affordable land and mild climates make them popular with retirees.

New incentives to downsize homes introduced in the federal budget may be a further boost to these areas.

Of the states and territories, the most construction of aged accommodation is occurring in NSW. It has 113 projects with construction begun or imminent during the next five years.

Within NSW, the highest frequency regions for construction are the Hills Shire, Newcastle, Wyong and Gosford.

Between these regions, 26 aged-care accommodation projects are approved or have begun, with completion expected by 2023.

Newcastle, Wyong and Gosford offer lower land prices along the coast.

An artist’s impression of Arcare’s Glenhaven aged care community in NSW.

As for the Hills Shire, while its lack of public transport to the city as yet makes it relatively unattractive for young professionals, the area has a quiet, leafy exclusivity for retirement communities.

The number of aged accommodation developments in each state and territory is generally proportionate to population.

The exception is South Australia, where 56 developments are expected to be completed during the next few years. Of these, 10 are in the Onkaparinga Council area, and six are in the Port Adelaide Enfield region. South Australia has a higher proportion of people aged 65 and older to the total population.

Looking at individual council areas, Brisbane City is by far the most popular spot for aged accommodation projects. In the past five years, it has seen more than $725 million in aged-care and aged-living construction, ranging from upgrades of existing facilities to a $60 million integrated care facility at Carina.

By 2020, 22 more projects are expected to be completed. In the same period, a further 11 are planned for the Moreton Bay regional area, nine on the Sunshine Coast and five in Toowoomba.

A common trend in new developments is the blending of care types in the one precinct, such as the three-tiered levels of care in The Village Coorparoo, which means people are likely to stay on the one site for longer, or “age in place”. The ageing-in-place model also was adopted in the recently completed Woodlands Aged Care Facility on the Sunshine Coast.

In the residential-care sector, the Aged Care Financing Authority estimates that during the next decade about 76,000 new places will be required, compared with just 35,000 established in the previous decade. In addition, much of the existing stock will require a knockdown and rebuild.

The forecast investment required in the next decade is $33 billion. While the initial costs make aged accommodation unappealing for the average investor, the boomer retirement transition could represent a further boom for the construction industry.

Eliza Owen is CoreLogic’s head of commercial research.

This article originally appeared on www.theaustralian.com.au/property.