Investing in Aged Care Facilities & Retirement Villages
When evaluating an investment, the investor should always ask the question, “Is the industry that I am considering investing in growing, and will its growth likely continue?”
Upon asking this question, an industry warranting a more resounding, yes, you will be hard-pressed to find. The aged care industry has experienced tremendous growth since the 1970s, with a continuing trend strongly predicted.
With an ageing population, the Australian government predicts that 76,000 new residential aged care facilities will be required by 2023-24 to cater for the growing demand for aged cared services.
Aged care is undoubtedly an industry within the Australian economy poised for substantial growth in the future, with new capital investment in recent years seeing significant volume.
The Growing demand for Aged Care
The graph above clearly illustrates the growing trend for an ageing population.
In 2017, approximately 3.8 million people were living in Australia aged 65 and older, representing 15% of the Australian population. The population growth is set to continue.
By 2057, there is expected to be over 8.8million older Australians, equating to a staggering 22% of the total population; by 2097, 12.8 million people, or 1 in 4, will be aged 65 and older.
Furthermore, as Australia’s population continues to age, the profile of this growing demographic is also expected to alter.
In 2017, 57% of the older population fell in the 65-74 bracket, 30% were aged 75-84, and 13% were aged 85 and over.
By 2047, it is projected that only 45% of the older population will be the youngest bracket of 65-74, while those aged 75-84will grow to represent 35% and Australians aged 85 and over will represent 20%of the older population.
These statistics undeniably highlight the growing demand that Australians will have for aged care facilities in the coming years.
Fuelling the growing need for aged care is the emergent necessity for dual incomes in working families. As more working families require both partners to be inactive employment, there is a reduced capacity for adult children to take care of their elderly parents as their independence begins to decline. As a result of these changing demographics in Australia, investment in the aged care sector has become increasingly popular.
Aged Care in a Nutshell
Aged care facilities – previously referred to as nursing homes – enjoy generous subsidies by the federal government. They are governed by various policies and statutory controls and administered by the private sector.
The government must first approve operators, and they primarily provide the funding. For investors, this arrangement represents stability, knowing their investment is highly reliable, providing they can maintain adequate occupancy rates and keep operation costs in check.
Shake-up in The Industry Leading to a Brighter Future
The aged care sector went through a period of operational and financial challenges. The Royal Commission into Aged Care created turbulent times for many operators.
The commission highlighted several examples of a failing system. When COVID-19 outbreaks occurred within many aged care centres at the beginning of the pandemic, it also questioned the level of safety for residents.
“The commission revealed shocking cases of neglect and abuse”, treasurer Mr Frydenberg said.
However, now that the dust has settled, the sector can expect a much brighter future.
The Australian government has tightened its commitment to provide adequate resources in response to the Royal Commission into Aged Care Safety and Quality. This assistance will help ensure the sector upholds the highest standards.
In the 2021 budget, landmark investments in aged care were recently announced, with the government pledging an additional $17.7 billion invested in Aged Care. The funding includes $10 per resident per day for providers to help them provide better care.
Growing Demand for Recession-Proof Assets
Since the Covid-19 pandemic, investors are choosing to relocate capital towards stable, recession-proof investments, and aged care facilities are high on the list. Despite an increase in properties on the market, demand continues to exceed the supply.
Understandably, when you consider the appealing benefits, including: land tax exemptions, long-term leases, and large landholdings.
Summary of the primary factors that make aged care an excellent investment
- Attractive leasing conditions. Long term tenants.
- Retirement villages and other aged care facilities are currently exempt from paying land tax.
- The industry enjoys strong government support. The federal government is committed to ensuring the Aged Care sector is allocated adequate funding to ensure the highest standards of care for the elderly community and helping to ensure the profitability of aged care providers.
- An ageing population. By 2057, there is expected to be over 8.8 million older Australians, equating to a staggering 22% of the total population; by 2097, 12.8 million people, or 1 in 4, will be aged 65 and older.
As the population ages, so too does the demand for aged care services. The projected forecasts are incredibly bullish for the immediate future, as well as looking much further ahead.
While Aged Care Facilities seem to be an astute long-term investment, finding the perfect site is vital to ensuring success.
Before sourcing, designing or constructing anAged Care facility, investors must carefully evaluate the key factors that determine the suitability.
Factors to consider include proximity to competitors, accessibility, parking, council zoning, and future potential growth of landholdings.
While Aged Care properties can make wise investments, it is critical to understand the key considerations. Failure to recognise and take heed of the importance of the varying dynamics will result in lower returns and occupancy rates.
Sites sourced and offered by QueenslandInvestment Consulting Group (QICG) are in high demand and based on operator requirements and instructions. Tenants are found and secured before property acquisition.
QICG understands that all investment properties have different requirements. And as such, we work closely with investors to recognise their unique needs and tailor bespoke solutions that align with their objectives.
Our process avoids the pitfalls felt by many other developers who fail to understand the variable dynamics of different sectors.
QICQ risk mitigation is critical in all of our projects. It provides the foundational framework for our entire process, and it is the primary reason we enjoy continued success for all of our clients.
Buy on Completion
QICQ also offer clients the option of buying an Aged Care property upon completion. This option eliminates the potential strain of development. Investors may enter an agreement with a developer to acquire the Aged Care facility upon completion off-market.
This approach can benefit the developer and investor, as the developer can pass savings on to the investor from reduced marketing expenditure.
For more information relating to an investment in the Aged Care sector, call our friendly team today at 1300 002 880 or email us at firstname.lastname@example.org.
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