The aged care industry is in a growth phase as the population ages, but that’s not the only reason there’s change happening in the products and services being offered by the sector.

 

Baby boomers have enjoyed the most prosperous period in Australia’s history, accumulating more private wealth than any previous generation. The older boomers are now aged 70 and their lifestyle expectations in aged care and retirement facilities are poles apart from their parents. The traditional retirement village in the suburbs, with basic services and largely segregated from the rest of the community, simply doesn’t cut it.

 

Retirees want independent living options that allow them to stay active and enjoy all of life’s pleasures, including room for their extended family and friends to stay—albeit not for too long!

As a result of these high expectations, the aged care and retirement living sector has significantly boosted the variety of options in the market place over the last decade. We’re now seeing much higher-quality choices in accommodation, food and lifestyle facilities like gyms and pools.

 

It’s obvious that residential aged-care (nursing home) operators remain heavily influenced by governments, particularly federal, given they’re government-regulated and subsidised. But there are moves towards a more flexible, user-pays system. For instance, the government retains limits on the number of subsidised places and on fees providers can charge. Yet operators can seek approval to charge extra for residents prepared to pay for premium services. Another example is last year’s change to the assets test, factoring in the family home. It means operators can charge higher bonds when residents move in.

 

Retirement villages aren’t quite as highly regulated but operators are still influenced by various pieces of state legislation.

They too will find their traditional financial model under the increasing scrutiny of potential residents and investors.

Most financial models for villages have these key components, albeit with many variations when you get down to the nitty-gritty:

• a long-term lease with an interest-free loan provided to the operator, based on the market value of the unit • recurrent fees, often a percentage of the aged pension, to fund operating costs such as maintenance of grounds, pools, etc.