Retirement living state of play and outlook
Australia’s birth rate between 1946 and 1964 increased substantially, fuelling a significant structural shift in Australia’s demographic make-up. Labelled ‘baby boomers’, and currently aged between 55 and 73 years of age, this generation is today shaping the way retirement accommodation is provided to older Australians.
Medical, economic and societal advances are allowing people to drastically outlive even relatively recent life expectancy estimates. If you are currently 65 years of age, your life expectancy when you were born was around 68 for males and 74 for females.
However, before you panic, there’s good news. Resulting from the aforementioned advances, as a 65-year-old, you are now, on average, expected to live another 19.5 years if you are a male, and 22.3 years if you are a female1.
As of 2017, there were 3.8 million Australians aged 65 or above, which comprised 15% of the total population. For reference, this figure was just 1.3 million (9%) in 1977 and is anticipated to be 8.8 million (22%) by 20572. This growth is expected to drive a large increase in retirement and aged care demand, and highlights the opportunity to both existing operators and new market entrants.
Retirement living and aged care: What’s the difference?
Defined as a residential dwelling and lifestyle complex, generally for independent and self-funded retirees over the age of 55, retirement living villages are made up of private homes, called Independent Living Units or ILU’s, and usually offer a range of shared facilities, such as community centres, pools, gyms and sports facilities.
According to the most recently available data, there were just over 170,000 ILUs in 2016, housing over 220,000 people. As baby boomers start to retire, it is anticipated that by 2036, the market will have approximately doubled in size1.
However, there is an increasing disparity between actual supply and this demand. The November 2018 PwC/Property Council Retirement Census, which saw contributions from 52 retirement living operators representing over 610 villages showed only 2,000 new ILUs are set to hit the market each year across the next four years. This current rate of supply is, on average, less than one quarter of what is required.
Unlike the retirement living sector, where additional healthcare and support is not the primary service driver, the aged care sector provides fulltime care to individuals requiring supervision and assistance.
As per the most recent statistics at June 2016, there were just under 200,000 residential aged care beds operational in Australia. Between 2009 and 2016, only 21,000 new places became operational, even though population growth amongst the 70-plus age cohort was 23%3.
It is estimated that by 2026, an additional 87,000 places will be required nationally in order to meet demand. This challenge will be heightened by any recommendations that may arise from the Aged Care Royal Commission.
Periodic reviews of the aged care industry have centred on whether the community can have confidence in the quality of the care being provided, and the effectiveness of the regulatory framework.
All previous reviews unanimously concluded that the aged care system is in need of reform, and it’s anticipated the current Royal Commission will do the same. The system is complex and fragmented, and history demonstrates reform has been exceedingly difficult to implement.
The table below highlights a number of key differences between retirement villages and residential aged care in Australia.
A push for greater customer outcomes
Consumers are more educated, discerning and empowered than ever before. In the retirement living sector in particular they, and their families, are looking for tailored services with a personalised and seamless experience, within an environment where they feel respected and engaged. There are clear benefits to operators who are able to design their offering around the needs of the end user.
The 2018 Retirement Census saw a strong push for greater amenity for residents in retirement villages with 97% of new village developments having an extensive range of facilities, compared to 83% of existing villages.
‘Age in place’
Another way in which operators are shifting to a more customer-oriented offering is through an ‘age in place’ model, where a retirement village resident is not required to move to another facility when their care needs become higher.
This is an appealing prospect for many older Australians, as it means they wouldn’t need to leave their lifestyle, friends, partners or home behind. Rather, dedicated medical professionals would be able to deliver a full spectrum of care to them in place.
However, according to the 2018 Retirement Census, ageing in place is often difficult to achieve. The closest alternative is through retirement living operators moving residents to aged care facilities that are either co-located or within close proximity to the retirement village. In both cases the individual has to leave their home.
There remains a significant existing and increasing shortfall in supply nationally. This will create an investment opportunity for operators who can meet the changing requirements of retiring baby boomers.
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- Australian Institute of Health and Welfare (AIHW), Deaths in Australia, 2018
- AIHW, Older Australia at a glance, 2018
- Knight Frank, Seniors Living Insight, 2017