The Australian Healthcare sector will continue to see significant change and both direct and indirect changes across the funding and legislative framework seeks to drive higher optionality for the consumer by transitioning to a consumer funded and lead framework.
Ultimately, M&A activity across the high demand sectors of Manufactured housing Estates, Retirement Villages and Residential Aged Care are likely to increase as marginalised players exit and scale is sought by corporatized operators to drive underlying earnings growth and by nexus yield.
In particular the emergence of transactions between local sports and services clubs and local Government incentive driven operations (particularly in Queensland) are gaining popularity as participants seek to broaden the opportunities for expansionary growth outside traditional constructs.
Onshore and offshore capital is plentiful with growing interest in Australian healthcare emerging from Korea and Japan as well as local superannuation funds as they seek to allocate surplus capital which may see asset price rise due to buying competition.
Residential Aged Care & Retirement Villages
A consumer driven, market based system where price, providers and care type is determined by the consumer is the Governments intent which inturn is forcing operators to adapt their accommodation and care service models. The importance of a clear market positioning strategy is therefore rising and the role of allied health and broadening of service provision (possibly via partnership) across the continuum of care is highly topical. As a result M&A activity is likely to increase with the probability of a mega merger also increasing.
Due to the deregulation of the home care environment and the changes in Residential Aged Care, vertical ‘apartment style’ village integrations are anticipated to increase as the rising volume of baby boomer retirees prefer to remain in urban settings – especially where higher levels of care can now accessed before the requirements of 24/7 care set in. Looking forward, should a suitable site come available we expect that bidders will be aggressive, potentially repricing the market.
Manufactured Housing Estates (MHEs)
With a financial structure less complex than retirement villages, this industry is ripe for growth. It is more likely that co-location of services within MHEs will develop overtime as whilst a lower cost option, necessity of care will persist.
Security of income and the potential to add valued through additional development and management efficiencies will continue to facilitate investor interest locally and offshore.