There was genuine surprise across the sector this week as the news broke that Australian Unity had decided to stay in the business of aged care.
In February this year, the mutual fund announced it would undertake a review of its aged care operations considering the financial and regulatory challenges facing the sector.
As we reported this week, late on Friday, its Group Managing Director, Rohan Mead, issued a statement announcing that Australian Unity will have a “continued focus and involvement in the aged care sector”.
The challenge for Australian Unity is size – its portfolio falls short of the 1,500 beds that former CEO – Independent and Assisted Living, Kevin McCoy, told SATURDAY in 2021 were required to be viable.
But will their decision to stay in the sector be validated in three years’ time?
Within three years, beds will be rolled gold
The last 12 months has seen a continued slowdown in new residential care developments.
See the chart above. Only $1.006 billion in new aged care building work was completed in 2021-22.
The largest players in the sector including Bolton Clarke, Regis Healthcare and Estia Health only have pipelines of between 500 to 800 beds.
Opal HealthCare is the exception to the rule with 21 Care Communities in their development pipeline in Sydney, Brisbane and Melbourne.
Yet it’s forecast that within the next five to 10 years, 80,000 beds will be required to meet demand from the Baby Boomers, for whom much of the older stock across the sector will be unfit for purpose.
Even with residential care trending towards acute care, there will be a significant undersupply of modern beds. Home care and Hospital in the Home will not solve the challenge of supporting ageing Australians living with dementia. Demand will far exceed supply.
And Plan B and greater use of consumer contributions will introduce new revenue streams. Each bed will generate ‘rolled gold’ revenue.
Australian Unity, with its well-located portfolio and focus on workforce development, should be well-positioned for this new market.
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