Historically, retirement villages have accounted for accommodating less than 5% of the retiree market. The fact that the population of over 60s will double in the next five years will, we expect, double the demand – and that’s not taking into account growth in the sector for any other reasons.
While messages such as this have become a bit of a ‘broken record’, what is perhaps missing from the message is that the baby boomer generation is not simply an anomaly. What follows is a sustained increase in the population of persons aged over 60. Additionally, as this aged population is spread across all economic backgrounds the demands will be across all markets in the aged sector.
Professor Warren Hogan in his seminal report to the Federal Government provides the broad view that aged care and accommodation market will become more and more corporatised and less influenced by the ‘non profit sector’.
At the same time the government is increasing its focus on community care consistent with its ‘ageing in place’ principles.
The trends in aged care and retirement living are well articulated and present an enormous potential for investment. The biggest hurdle for investors is to gain a comprehensive and practical understanding of legislation which regulates the quality of facilities and care provided.
The Aged Care Act and accompanying Principles run for some 850 pages. Retirement Village legislation underwent significant reform in 1999 and is about to undergo a further overhaul placing added responsibilities on operators.
The potential for investment is not limited to delivery of traditional models of care and accommodation for the aged. Home Instead Senior Care (a client of McCullough Robertson) now successfully provides user funded care to that market of elderly clients who want quality flexible services which would be difficult under the existing legislated aged care models. They are one of a growing number of entrepreneurs exploring opportunities with the benefit of understanding the market and knowing the limitations of traditional models.
The sectors are idiosyncratic. However as an investment opportunity you would be hard pressed to find other options which can hope to present the same reward for investment in the five to ten year term. Those who are brave enough to gain an understanding of the sectors or join with those who have industry knowledge will be best placed within the next five years to reap the benefits.
Another of McCullough Robertson’s clients, TriCare has enjoyed a successful collaboration with the Macquarie Bank who realised the need for TriCare’s specific knowledge and industry acumen.
In five years time those who have delayed entry into the market may find that they are competing against sophisticated corporates who have not only gained the experience but also developed networks with a changed ‘non profit’ sector - sufficient to guarantee market share.
There is an obvious and increasing interest from the banking sector in funding investment in aged care and retirement living. High profile purchases in both Australia and New Zealand demonstrate a real confidence in the sectors from both traditional and more speculative lenders. This will increase the availability of funds in the sector and will accelerate investment.
While there will always be opportunities for investment once the wave hits it is likely that those who will ride the wave of this significant demographic change most lucratively are those who are in a position to act within the next two to five years.
