The Hunter Region is experiencing a wave of economic growth as a result of one of the biggest jobs surges in a decade, a rapidly diversifying economy with strong service sector growth in health and education and high levels of infrastructure investment (light rail, university expansion). Add to this, local property prices at more than 50% lower than the Sydney average, creating significant arbitrage opportunities, combined with the natural amenity of the region, you have yourself a compelling proposition. This is great news for the region, but what does it mean for the retirement and aged care sector?
Sitting beneath all of these economic drivers is one of the main game changers – an ageing population. We’ve heard it all before, perhaps even to the extent we’re a little desensitised to the issue, however the fact of the matter is that the opportunity in the retirement and aged care space is still very much in front of us
Take Figure 1 and 2 below – there are two key things to note:
- The first is that that baby boom – those people born between 1945 and 1965 are currently aged between 53 and 73. The current average age of entry into retirement across Australia is 75. In other words, the front edge of the boom is only just reaching the average age of entry into retirement now.
- The second is that over the same period life expectancy has increased from 70 to 84 and with the pension eligibility pushing to 67, we currently have almost two decades of post-retirement enjoyment to look forward too.
Again, what does that mean for the retirement sector?
In numerical terms the impact of both these factors will see Australia’s over 65 population almost doubling in the next 20 years – an increase equivalent to about 2.6 million people.
While this will mean, we will probably have to work longer, creating significant implications for our workforce, tax base and health care requirements, it will also create significant underlying demand for age appropriate housing.
Specifically, how does this relate to The Hunter region?
Figure 3 shows the Hunter age profile now compared to the projected profile in 2036.
It clearly demonstrates the key growth segments over the period, with persons aged 70+ expected to increase by almost 70,000 people over the period. That is an average of growth of 3,500 persons aged 70+ per annum.
Growth in the 70+ age cohorts is over 3 times faster (2.8%pa) than total population growth.
Although the majority of people are ageing in place in their own homes, Retirement Village penetration across the Hunter is at 6.3%, which is above the NSW average. Assuming the current rates of market shares and household sizes were to remain the same, then the future senior living requirement for the Hunter region to 2036, is:
As illustrated, even without any increase in the current rates of demand, there are significant emerging opportunities across the Hunter to build commercial retirement living and aged care products, however as always it is critical that there is an alignment between site selection, product mix and target market demographics and that appropriate fundamentals and metrics are used in supporting the investment case.
New models will need to continue to evolve to stay relevant to the emerging demographic, both those who have seen significant wealth increases through capital gains and superannuation and those that will require more affordable options.
And finally given the size of the task at hand, planning and governance frameworks need to support delivery and keep pace with industry transformation.
If you would like to know more about Retirement and Aged Care Development opportunities in The Hunter region or to request a complimentary copy of 2018 Market Outlook - Hunter Retirement Opportunities, please get in touch with us today at firstname.lastname@example.org.
Jeremy McKinnon, MacroPlan’s Senior Advisor will be presenting a Retirement and Aged Care Outlook at The Property Council of Australia’s Illawarra Business Lunch in August. For more information please visit: https://www.propertycouncil.com.au/web/EventDetail?EventKey=NIL230818