One of the most consistent results of CBRE’s annual Asia Pacific Investor Intentions Surveys is the strong interest shown by buyers in the senior’s housing market. Australia possesses the largest of these markets in the APAC region, and CBRE’s National Head of Retirement & Health Care Grant Gilbett says that with demand for retirement living of all types only set to increase, opportunity is on the rise. But at the same time, investors should tread carefully as this sector has many moving parts.

“The retirement living market is highly fractured,’ Mr Gilbett says. “Operators range from traditional developers with large portfolios such as Stockland and Lendlease and other for-profit owner-operators, as well as smaller not for profits.”

Senior housing formats also present many complexities “within operating and management structures to government regulations” Mr Gilbett adds, and advises investors seek “substantial support” from skilled valuation professionals before diving in. 

Retirees on the rise

Complexities aside, seniors living is set for steady growth. Latest figures from the Australian Bureau of Statistics released November 30 show that as of June 30 2020, there were 4.2 million ‘older’ Australians – classified as those over 65 – making up 16% of total population. In 1970, the same age group comprised 8.3% of the population, and in 1995, 12%. Looking ahead, the ABS forecasts that by 2066 the 65-plus age group will comprise between 21% and 23% of the population.

The number of Australians aged 85 and over is also rising, lifting by 0.5% of total population in 1970, to 1.1% in 1995 and 2.1% (528,000) to June last year. This group is projected to rise between 3.6% and 4.4% by 2066.

Within those aged 65 or older, more than half of older people were between 65 and 74 years (56%), 3 in 10 were aged 75-84 and about 1 in 8 were aged over 85.

Home Sweet Home

While health-related issues are often a catalyst, many well-funded retirees are increasingly looking to downsize from large, maintenance-intensive homes to simpler accommodation providing a range of services and amenities

As the population ages property analysts point to problems with housing, lack of suitable properties for downsizing and low retirement savings as other drivers of all types of senior living scenarios. “While health-related issues are often a catalyst, many well-funded retirees are increasingly looking to downsize from large, maintenance-intensive homes to simpler accommodation providing a range of services and amenities,” Mr Gilbett says.

Residential Land Lease Communities (RLLCs) are a relatively new concept, developers quick to meet a desire for typically resort-style communities aimed at the over 55’s. In an RLLC, a resident owns their own home and leases the land on which it sits. Ranging in scale and levels of prestige, from caravan parks to upmarket developments, these communities continue to mushroom throughout metro and regional locations as younger retirees seek to downsize from family homes to affordable yet stylish living solutions. James Kelly, managing director of Lifestyle Communities which develops RLLC-style communities, has described housing over-55s as “a mega trend”. 

Retirement villages also aim to provide long-term security and hassle-free living, yet homes are leased instead of owned. Residents pay a lump sum or ‘ingoing contribution’ is paid on entry, and on leaving, Deferred Management Fees (DMFs) are paid from this amount.

Golden ageing

Luxury has become the name of the game across the senior living market. Developments increasingly offer not only pools and tennis courts but also cinemas, sophisticated temperature-controlled wine cellars, piano lounge bars, gyms, saunas and ten-pin bowling alleys. One development at Tea Gardens on the NSW north coast offers an undercover bowling green, while some residences in Stockland’s Cardinal Freeman Retirement Village in Sydney’s Ashfield feature fall-monitoring devices and voice-activated appliances. The village was built around restore heritage gardens and comes with a café and clubhouse containing a heated pool, billiards room, ballroom, bar and lounge.

Mr Gilbett said recent years had seen more investors and funds entering the space in search of higher yields. Some of the most notable have been Brookfield’s $1.3 billion purchase of Aveo Group, Australia’s largest retirement village operator, in 2019, Dutch pension fund APG’s acquisition of a percentage of Lendlease’s retirement living business in 2017.