With Australia’s population increasing by close to 500,000 in 2022, housing supply has been a burning issue across the country given price rises and rental vacancies plummeting.  The mismatch between the supply of homes and the increasing demand as the population grows has put pressure on all segments of the housing market. The rapid rise in construction costs and labour shortages has been a major stumbling block for developers adding stock across the country, be it houses, units, infill development as well as options for seniors and aged care or the student market.

There is no doubt that Australia has an aging population, over the last 20 years we have seen a ballooning age cohort emerge in the over 60s group now representing approximately 6 million, up from 3.3 million in 2002. With approximately 130,000 people each year being added to this age group over the last 20 years, housing options have not kept pace with this growing demand. In this younger 60+ age group, seniors housing and retirement living are the most sought after providing greater experiences, services with low care, freeing up traditional housing stock across communities.

Australia’s over 80 population is currently represented by more than 1.1million, this has increased 80.5 per cent over the last 20 years. A combination of the aging baby boomer generation, together with Australia’s lifestyle and improved medical practices, has resulted in average life expectancy becoming the fifth highest in the world (2021) at 83.2 years old. For this older age cohort or those requiring additional care, aged care facilities offer a variety of levels of care and benefits from the Federal Government subsidies for operators. Given this government backed income historically there has been high interest in aged care facilities as an investment class. Institutional and listed funds are increasing their exposure to these assets particularly given their high occupancy, limited supply and ongoing growing prospective pool of residents.

Looking at the supply of these facilities across the country, during 2016-2018 we saw approximately 10,000 aged care and senior living units commenced each year, during 2019 we did see this decline and, as we entered the COVID period, further decreases were felt. As a result in 2022 only 5,730 dwelling units were completed across Australia, a significant mismatch compared to the rapid increase in population over this same period which saw the over 60s age group increase by 149,500 people.  

By the end of this year, a further 8,200 units are expected to be completed, however, this does not meet the existing demand particularly for the expanding over 80s age group requiring care facilities. While we are currently in an undersupply situation, this is expected to worsen given the construction slow down and population pressures, particularly over the coming years where these age groups will further grow.

On the investment front, we continue to see buyers seeking out care facilities backed by government subsidies. This sector continues to be attractive to the institutional and offshore buyer groups, resulting in more than $1.7 billion in sales during 2022/2023. Seniors’ housing and their strong income profile - given high occupancy, rising rents, and home values - has also not gone unnoticed by investors. Although, this has come back in recent years due to the tightly held nature of these assets, which has ensured yields remain competitive in the 5-7 per cent range.