- Construction for the sector is forecast to be ahead of other property sub-subsectors.
- Capital growth is also expected to be strong over the coming 12 months.
- Housing diversity is proposed as part of the solution to the current housing challenges.
The Australian real estate market is expected to see more retirement living projects kick off, as the latest Property Council Survey reveals that construction activity in the sector is forecasted to outpace other property markets.
However, there are hurdles in the way:
“There is still much uncertainty across property sub-sectors, with construction prices, materials and labour continuing to drive uncertainty,” said Retirement Living Council executive director, Daniel Gannon.
“The other x-factor is legislative reform, which is taking place in every corner of the country and impacting two thirds of Australia’s retirement living markets.”
Daniel Gannon, Retirement Living Council
“If these reforms make it harder for operators to build and operate age-friendly communities, it could tighten the supply clamp at a time when confidence remains high, construction activity has a strong pipeline, and when the nation needs housing,” he said.
Construction activity expectations by sector
Construction activity for the retirement living sector is forecast to remain at historically strong levels, with Gannon noting that it will outperform other sub-sectors; retirement living construction activity is expected to be greater than residential, office, retail, and industrial activity combined.
“However, we know that the development supply pipeline planned for the next three years is forecast to fall by more than half, largely a result of local planning systems and legislative frameworks that could constrain supply,” said Gannon.
“If governments around Australia create investment and development environments that facilitate more supply, the sector is geared up to do it,” he added.
The sector also continues to forecast strong confidence around capital value growth.
Retirement living capital growth expectations
Diversifying the housing stock
Gannon reiterated the message that retirement living can play a pivotal role in Australia’s tight property market. In particular, addressing the rapidly ageing population.
“While the demographic and housing outlook is potentially grim, there is a solution to this crisis,” he said.
“The more than 2,500 retirement villages across the country can allow residents to maintain their independent lifestyle as they age, while still enabling them access to care, support services, and community.
“Given the number of people aged 65 and over will increase by more than 50% to 7.1 million over the next two decades, we need to capitalise on a sector that is ready, willing and able to provide more homes for older Australians,” he said.
Affordability was another perk that was previously highlighted by the RLC.
Data showed that while a two-bedroom unit in a Western Australian retirement village grew by 12.7% over the 18 months to December 2022 to $374,000, the median house prices for the same locations rose by almost 17% to $657,000.
Dispelling the common misunderstanding, Gannon previously noted that retirement villages are different to aged care, and indeed can prevent entry into aged care.
