Leaders from the aged care and retirement living sector gathered with Westpac Healthcare and Business News at an exclusive roundtable lunch to discuss the emerging trends and new models of care shaping the industry.
Leaders from the aged care and retirement living sector gathered with Westpac Healthcare and Business News at an exclusive roundtable lunch to discuss the emerging trends and new models of care shaping the industry.
The focus is shifting to meet the changing needs of an ageing population and a new wave of baby boomer retirees and the generations following. Businesses are responding to the shift in retiree demographics who are seeking customised solutions for their retirement plan and aged care living options that cater to their unique lifestyle preferences.
There is a need to collaborate between financial services, legal services, property developers and the aged caresector to meet the growing demands while navigating law reform and new models of care that are shaping the wayforward for the sector.
A changing landscape
The landscape of retirement living in Western Australia is evolving, driven by shifting demographics and changing consumer preferences.
Emerging retirees, namely baby boomers and upcoming generation X who will be winding down their long careers and seeing their children leave the nest, are shifting what aged care and retirement living will look like in Australia.
The changing generational needs of baby boomers, now aged in their late 50s, 60s and 70s, are shifting the needle of what they expect out of retirement living.
Westpac brought together industry experts across aged care, retirement living, property development, finance, and legal services, including leaders from CBRE, Alinea, St Ives, Hall & Prior, RAAFA and HWLE to share perspectives about the shifting trends and developments in retirement living.
The group discussed roadblocks, legislation changes, financial considerations, the land lease model, and the impacts of the construction industry on developments. The discussion shed light on the sector’s shifting focus to create thriving communities with integrated, multifaceted services and psychosocial support.
“Where we’re seeing a lot of activity and opportunity is the creation of more integrative communities that provide greater choice to meet the changing needs and expectations of consumers. That’s a theme that’s happening right across the country,” Westpac Healthcare WA Relationship Director Kristy Yow said.
While most baby boomers want to hold onto the family home for as long as possible, they are increasingly downsizing to move into closer-knit communities and sought-after lifestyles that connect them to other people in their age bracket and provide an environment which can adapt to meet their changing care requirements.
Grant Gilbett, CBRE National Director of Retirement and Healthcare, pointed to the shift retirees are making to downsize and move into townhouses and strata apartments. “We’re seeing a push towards co-located villages offering serviced apartments, independent living units and
aged care all standing on the same land, around three to five hectares,” he said.
There is still a move to sub-acute residential aged care for seniors who stretched living at home for as long as they could. Rather than settling into retirement living communities earlier on they moved to an aged care facility later for a shorter timeframe closer to end-of-life, which is typically 18 months or less.
Those who move into retirement living earlier are looking to live out their retirement years in a safe, secure environment with companionship and connection while still enjoying their independence.
Retirement living offers a range of amenities that supports the social wellbeing and health of retirees, from healthcare services to recreational activities that provide a sense of community.
Businesses are responding to the emerging generational trend of retirees seeking customised solutions that align with their unique lifestyle preferences and needs.
Shane Yensch, Executive Director of aged care provider Alinea, said offering more services and community togetherness in retirement living communities is part of a continuum of aged care, incorporating quality retirement living options integrated with serviced apartments, home care
services, and aged care facilities.
“Trying to crystal ball what we’re going to need when we retire for the demographic that’s coming through, the baby boomer, and looking what they want out of a retirement village, is going to change how things operate. The whole industry is changing and we’re sitting back trying to plan things for a 25-plus-year development,” he said.
“We’re now looking at a continuum of aged care, which has probably changed in some respect because they’re going to want more services as it moves along.”
Mr Yensch added that people still want to live at home for as long as they can. “It’s supposedly what all baby boomers want. People are moving into residential aged care, not necessarily retirement villages, at a later age. It also means if they move into a retirement village, they are
probably looking for services that are on that continuum,” he explained.
“I think one of the things about retirement villages is security, a physical security but a concept more than anything. People in a group feel more secure. It will be the delivery of services into the retirement space that is looked at as much as the infrastructure that they’re buying.”
The retirement living sector will need to adapt to these emerging generational trends to stay competitive and meet the diverse needs of the ageing population as the demand for premium seniors living options continues to grow.
Leaders across aged care, residential living, property development and finance shared their perspectives about the shifting trends in the sector.
New models of care
Australian Bureau of Statistics data shows 140,000 people retired in 2020, with an average age of 64.3 years. The average age of retirees is 56.3 years, and the pension was the main source of income for retirees.
In WA, there are around 25,500 residents in about 300 retirement villages across the state.
Across the country in the eastern states, there are examples of what’s happening in the industry more broadly, such as having access to doctors within a facility for the retirement community, which provides a diversification of revenue streams.
“Thinking about new revenue streams in terms of capital inflows, operational revenue and complimentary service propositions, projects that are different types of capital provides more of an operational revenue,” Mrs Yow said.
“Its critical to understand the needs of the community, noting that these will change over time, and ensuring the design flexibility to deliver value to residents today and tomorrow.
“With this shift, we are seeing a generation with increased financial capacity and willingness to pay for the experience they desire.
“We are seeing a lot of investment from the private and NFP sector, with operators looking to provide options across the care continuum and that is driving new and innovative environments.”
Managing risk
The financial viability of residential aged care persists, with 63 per cent of residential aged care providers operating at a loss. In FY22, the sector operated at a record loss at a deficit of $32.97 per resident per day.
The Aged Care Taskforce report, a review of funding arrangements for aged care, due to be released in December 2023, is anticipated to drive greater revenue for providers.
The role of the banker is to help clients manage risk to deliver value to their communities. One of the key challenges in the market impacting supply is increased construction costs and delays.
“Our role is to see around corners and the risk is the construction risk,” Westpac Senior Relationship Manager of Healthcare Scott Hood said.
“If you’re looking at timelines that push out from 12 to 18 months to three years, what capacity do businesses have to be able to fund the project costs? We can help with some of that risk mitigation and identify what some of those risks are early on.”
According to government records, $5.6 billion was invested in new builds and refurbishments in aged care prior to the pandemic in 2019.
Since 2020, there have been many challenges in the construction industry which have affected new developments.
Hyper-escalation in building and construction costs, with examples of increases of up to 70 per cent over 12 months, have been driven by inflation, workforce shortages, economic stimulus, and supply chain challenges.
The building industry still remains under pressure, with the inflated costs only beginning to ease slightly after more than three years of hikes.
This has accelerated the trend towards acquisitions and repurposing existing properties rather than building new facilities to curb delays and increased construction costs.
“There has been a lot of activity in acquisitions, but development has been slow off the back of construction industry problems which continues,” Mrs Yow said.
“We’ve seen a 2 per cent increase in activity in the construction sector just in the last March quarter which hopefully indicates we’re starting to see an easing of those cost pressures. Hopefully we’re starting to see that moderate. But it is certainly something that has led to more activity in the acquisition side,” she said.
Mr Gilbett agrees that elevated construction costs has muted several projects. “Jobs are struggling to get off the ground because of the feasibilities,” he said.
“From a viability perspective, it is still very difficult to get them to launch because construction costs are holding them back. I’ve seen some building costs coming in well above what we would expect above the realisation.”
Even though interest rates have gone up, Mr Gilbett said it is “still affordable” to borrow at the current rate. “It’s not killing the development or project side; it’s the inflationary costs that are impacting developments at the moment,” he said.
Regional projects, where land tends to be cheaper, may still be difficult to get off the ground with trade issues and a lack of accessibility to tier 1 and 2 builders.
New models
There is a move away from the traditional model of retirement villages, which is “the buy-in at the front and refund of exit entitlements at the back”, with a focus on more financial flexibility, retirement living quality, and lifestyle choices.
Meagan Johnston, Partner at HWL Ebsworth.
“In terms of new retirement living models, there’s a move towards financial flexibility and lifestyle choices and more simplicity,” said Meagan Johnston, Partner at national law firm HWL Ebsworth Lawyers.
“In terms of development trends in retirement living, we’ve had some heightened enquiries around build to rent (BTR) models, and although those structures aren’t necessarily targeted towards seniors living in the sector at this stage, that will certainly happen. There is a high level of tenure security as BTR is purpose-built rental accommodation let on simple residential tenancy agreements.
The WA and Commonwealth governments are supporting that with various tax concessions for BTR developments,” Ms Johnston said.
“We’re also seeing a trend around rental villages and serviced apartments targeted at seniors which also have a high level of security of tenure and simple residential tenancy agreements,” she added.
