New Zealand continuum of care retirement villages now house 14% of the Over 75 population: 6% compound growth

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Verifying the market appeal of retirement villages with an ongoing care strategy, the NZ village model is growing at a compound rate of 6%.

Approximately 6 to 7% of all new homes built each year are in retirement villages. Ryman Healthcare is now the largest builder of new homes in the country, with a total new project value at $900 million.

New Zealand has one-sixth the population of Australia, at 4.9 million.

The industry is poised for future growth with some 21,400 units in the pipeline as at the end of 2020.

In 2019, the sector built 1,935 units. This compares to Australia where approximately 3,500 village units were built.

Pro rata to the Australian population, New Zeeland’s build rate equates to 12,000 new homes.

Aged care is a cornerstone of the NZ model

The RVA explains the role of care in their business model as follows:

As a result of resident demand for future-proofed care needs, most contemporary RV developments focus on providing residents with an ‘integrated’ village offering that offers a continuum of care.

This means most operators combine independent living units (ILUs) with care beds across rest home, hospital and in some cases dementia level care to cover the varying needs of residents at different stages of their lives.

Generally, the provision of aged care relies on government funding and typically, 40+ beds are required to establish the necessary economies of scale to cover the cost of day-to-day operations.

In response to industry challenges including limited growth of government funding in a high inflation environment (particularly staff costs) and falling aged care approvals, operators have introduced additional levies, such as premium accommodation charges, reflecting differentiated levels of care and typically higher quality accommodation, and for ad hoc health services in order to sustain their care operation.

In most villages, proceeds generated from the independent living segment of the business are used to cross subsidise aged care.

If the model changes and the margin from ILU development reduces through increased regulation, this would likely result in a decrease in the provision of aged care by RV operators and, therefore either place a greater burden on the health system or increase costs for care residents.

The recommendations of the Aged Care Royal Commission are a blueprint for the Australian village sector moving to this New Zealand model, but delivering private aged care.

It is being proven by Ryman who have launched in Australia, and Australian operators like LDK. You can watch Paul Browne present his LDK model at the LEADERS SUMMIT HERE.