$5.3 billion of building works were either completed or in-progress as at 30 June 2019, up from $4.9 billion in 2018, but operators’ appetite for rebuilding and upgrading their existing homes is on the slide.
According to the latest funding and financing data from the Aged Care Financing Authority (ACFA), there is still a lower number of providers reporting plans to upgrade or refurbish compared with 2016-17 and prior.
Check out the table above.
As you can see, just 5% of providers said they planned to upgrade their facilities while just 1% said they would rebuild – a further decline from 2017-18 and a considerable drop from 2015-16, when these numbers were at 5% and 14% respectively.
Consultation with providers blames a range of reasons for the decline including depressed returns, policy and regulatory uncertainty, the potential impact of increased Home Care Packages, plus more recently the uncertainty about the future direction of the sector following the Aged Care Royal Commission.
Instead, operators said their immediate plans would be directed towards retirement living as they looked to diversity their businesses and establish integrated retirement, aged care and home care operations.
“For-profit providers continue to emphasise that the current return on capital employed in aged care was below the cost of capital and, in the absence of any change, this would curtail additional investment in the sector,” the report concludes.
“The uncertainty associated with COVID-19 is likely to cause further delayed investment plans in the residential aged care sector.”
Providers have reported to us that they have put a freeze on new developments during COVID and for the near future.
However, we always come back to StewartBrown’s Senior Partner Grant Corderoy’s analysis that facilities need a major refurbishment every eight to 12 years in order to stay attractive to families and competitive in the marketplace.
Even with refurbishment, the effective life of a building is still only likely to be 30 years.
Are providers taking this into account?
