“Lowest level of investment” threatens aged care pipeline: Ansell Strategic
- Returns remain weak: New aged care development remains uneconomic
- Profitability falling: Labour costs continue outpacing funding increases
- Investor appetite grows: Residential aged care acquisitions accelerate
- Supply remains tight: Bed shortages worsen as demand rises
Consolidation may be grabbing the headlines, but Ansell Strategic says the central challenge facing residential aged care remains the same.
Residential aged care is still not generating adequate returns to drive “sufficient investment in new supply” to meet the needs of the ageing population, according to the aged care consultancy’s 15-page Q3 FY26 Board Pack.
Falling sector profitability is driving “the lowest level of investment in new homes at a time we desperately require it”, writes Ansell Strategic Managing Director, Cam Ansell.
Referring to StewartBrown’s latest report, the report says the revenue increase from the 1 October 2025 AN-ACC base price increase was insufficient to offset a 13.7% increase in direct care labour costs.
Earnings for the period fell 33% from the FY25 to $13.24 per resident per day in 1H FY26.
These losses will compound over the coming year as more operators move towards higher levels of compliance with the mandatory care minute targets, the report added, with the full effects of mandated staff minutes yet to be “fully absorbed”.
Despite weaker residential aged care earnings, the combination of rising demand and tight supply of aged care beds means that investors have a “growing appetite” to acquire residential aged care homes, said Cam.
“Those left standing post consolidation can expect to have much greater command over pricing as State and Federal Governments grapple with mounting pressure on the hospital system,” he said.
Ansell Strategic advised vendor Bain Capital on the sale of Estia Health to Stonepeak and Axight, the most significant aged care transaction of the year so far.
Cam said Ansell Strategic has also been “inundated” with smaller acquisition deals during the quarter. Last month, he told The Weekly SOURCE that the firm is working on around 20 aged care projects across Australia and New Zealand.
The report lists 12 “notable transactions” in the quarter.
Despite the M&A “excitement”, Cam noted that much of the residential aged care construction work they do is co-located within retirement villages which improves the quality of the infrastructure but reduces the overall supply of new beds.
The need for investment in residential aged care capacity remains a “critical issue”, the report concludes.
Download the latest Board Pack here.
