Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 166

Seniors living is becoming a mainstream investment

Australia’s population is ageing. The number of people over 65 has more than doubled in 20 years from 1.6 million in 1995 to 3.6 million in 2015, and is forecast to reach 5.6 million by 2030. The seniors living industry is also undergoing significant change due to this ageing population, industry consolidation, changing expectations, and a shortage of quality accommodation.

The seniors living industry has three key accommodation components:

  • manufactured housing estates (MHEs) – operate under a ground lease agreement in which the resident owns the relocatable home and leases the right to occupy the site from the village owner or operator
  • retirement living communities and villages – facilities comprising apartments or villas in which the residents do not own the unit but live in it subject to a lease or licence to occupy. Retirement villages typically operate under a deferred management fee (DMF) structure
  • aged care – a special-purpose facility that provides accommodation and other support ranging from assistance with day-to-day living to intensive nursing care to frail and aged residents.

Increasing degrees of care

Older Australians are moving along the spectrum of seniors housing, from independent living at home, to accessing low-level support services in a retirement living community or manufactured housing estate, to ongoing nursing care in a residential aged care facility (as shown in Figure 1). There is also a growing move toward integrated facilities, offering a ‘continuum of care’, through the integration of an aged care facility and/or provision of home care services within, or adjacent to, an MHE or retirement living community.

Figure 1: Continuum of care for seniors living

Continuum of care for seniors living

Continuum of care for seniors living


Source: Folkestone and the Productivity Commission. Click to enlarge.

Industry consolidation

Ownership across all three components of the seniors living industry is highly fragmented and the quality of facilities varies widely.

In the retirement living sector, the top six operators represent only 29% of the number of operators in the sector, according to Colliers International. However, approximately 60% of the facilities are currently accounted for by the for-profit operators such as Lend Lease, AVEO, Stockland, Retire Australia, Living Choice, and Australian Unity and 40% by the not-for-profit operators.

The aged care sector is a similar story. As at June 2014, approximately 63% of operators operated a single facility, accounting for 24% of all operational aged care places, while 29% operated between two and six facilities. Conversely, large providers with more than 20 homes comprised only 2% of all providers but 22% of operational places.

Increased participation from the private sector and institutional investors is leading the move from a boutique cottage industry to one of growing sophistication and scale. A flurry of ASX listings in recent years by both specialist aged care operators such as Japara, Regis and Estia, and listed A-REITs such as Gateway Lifestyles, Ingenia, and Lifestyle Communities, have shone the spotlight on the sector. AVEO (the former FKP) is transforming into a specialist retirement and aged care operator. We expect more opportunities for investors to access the sector through the unlisted space via both private equity and unlisted real estate funds.

Large numbers of affluent baby boomers are expected to bolster the sector’s numbers over the next 10-20 years. These customers will pay more for facilities and services but they will also expect high standards. There will be a greater emphasis on quality service, brand recognition and the reputation of service providers.

The Federal Government wants more people to age in their own home, with a commitment to increase funding for home care packages. MHEs and retirement villages will offer additional services including home care packages within their communities as a way to enhance their overall profitability.

Shortage of quality accommodation

There are approximately 2,300 retirement living communities and villages in Australia, comprising more than 140,000 dwellings and housing approximately 184,000 people, according to the PwC/Property Council Retirement Census for 2015. The average age of a retirement living facility is 23 years, with many of the earlier ones heading towards obsolescence. Folkestone estimates that if the penetration rate of retirement living communities and villages was to increase from just under 6% to 7.5% of the over 65s population, the population of retirement living facilities would more than double to 419,000 by 2030 (see Figure 2). If penetration rates were to increase to 10% (in the US it’s currently around 12%), approximately 560,000 people would be living in retirement living communities by 2030.

Figure 2: Implied demand, retirement living community residents: 2015 – 2030


Source: Folkestone/ABS. Click to enlarge.

The Aged Care Financing Authority estimated in 2015 that the residential aged care sector will need to build approximately 82,000 additional places over the next decade compared with 36,778 new places created in the decade leading up to June 2014. At the same time, the sector will need to rebuild a substantial number of current facilities which are old, inefficient and don’t meet the standards of the government and the community. Assuming that the cost of construction continues to grow at the current rate, and that a quarter of the current stock of buildings is rebuilt at an even rate over the next decade, the Federal Government estimates the sector will require about $33 billion of investment over the next decade.

Figure 3: Number of operational residential aged care places required, 2014 - 2025

Number of Operational Residential Aged Care Places Required 2014_2025 

Source: Aged Care Financing Authority. Click to enlarge.

An attractive asset class

We believe all three components of the seniors living sector – manufactured housing estates, retirement villages and aged care – will continue to professionalise, consolidate and become more attractive as an investment asset class.

This will require a substantial amount of capital, and we see significant opportunities for investors taking a long term investment view to participate in the evolution and growth of this important sector either through investing in the operations or the underlying real estate via both the ASX and unlisted funds.


Adrian Harrington is Head of Funds Management at Folkestone Limited (ASX:FLK). This article is general information and does not consider the investment needs of any individual. Future articles by Adrian will explain the fees and funding of various retirement sector facilities.



Turning point: the 2020s baby boom retirement surge

What the RC, Budget and Keating mean for aged care

Royal Commission must remove aged care anomalies


Most viewed in recent weeks

Too many retirees miss out on this valuable super fund benefit

With 700 Australians retiring every day, retirement income solutions are more important than ever. Why do millions of retirees eligible for a more tax-efficient pension account hold money in accumulation?

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.

Is the fossil fuel narrative simply too convenient?

A fund manager argues it is immoral to deny poor countries access to relatively cheap energy from fossil fuels. Wealthy countries must recognise the transition is a multi-decade challenge and continue to invest.

Reece Birtles on selecting stocks for income in retirement

Equity investing comes with volatility that makes many retirees uncomfortable. A focus on income which is less volatile than share prices, and quality companies delivering robust earnings, offers more reassurance.

Welcome to Firstlinks Election Edition 458

At around 10.30pm on Saturday night, Scott Morrison called Anthony Albanese to concede defeat in the 2022 election. As voting continued the next day, it became likely that Labor would reach the magic number of 76 seats to form a majority government.   

  • 19 May 2022

Keep mandatory super pension drawdowns halved

The Transfer Balance Cap limits the tax concessions available in super pension funds, removing the need for large, compulsory drawdowns. Plus there are no requirements to draw money out of an accumulation fund.

Latest Updates

SMSF strategies

30 years on, five charts show SMSF progress

On 1 July 1992, the Superannuation Guarantee created mandatory 3% contributions into super for employees. SMSFs were an after-thought but they are now the second-largest segment. How have they changed?

Investment strategies

Anton in 2006 v 2022, it's deja vu (all over again)

What was bothering markets in 2006? Try the end of cheap money, bond yields rising, high energy prices and record high commodity prices feeding inflation. Who says these are 'unprecedented' times? It's 2006 v 2022.


Tips and traps: a final check for your tax return this year

The end of the 2022 financial year is fast approaching and there are choices available to ensure you pay the right amount of tax. Watch for some pandemic-related changes worth understanding.

Financial planning

Is it better to rent or own a home under the age pension?

With 62% of Australians aged 65 and over relying at least partially on the age pension, are they better off owning their home or renting? There is an extra pension asset allowance for those not owning a home.


Listed infrastructure: finding a port in a storm of rising prices

Given the current environment it’s easy to wonder if there are any safe ports in the investment storm. Investments in infrastructure assets show their worth in such times.

Financial planning

Power of attorney: six things you need to know

Whether you are appointing an attorney or have been appointed as an attorney, the full extent of this legal framework should be understood as more people will need to act in this capacity in future.

Interest rates

Rising interest rates and the impact on banks

One of the major questions confronting investors is the portfolio weighting towards Australian banks in an environment of rising rates. Do the recent price falls represent value or are too many bad debts coming?



© 2022 Morningstar, Inc. All rights reserved.

The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. Any general advice or ‘regulated financial advice’ under New Zealand law has been prepared by Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892) and/or Morningstar Research Ltd, subsidiaries of Morningstar, Inc, without reference to your objectives, financial situation or needs. For more information refer to our Financial Services Guide (AU) and Financial Advice Provider Disclosure Statement (NZ). You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.

Website Development by Master Publisher.