It is hard to escape the challenging conditions our industry is facing and not get caught up focussing on tough times. With high interest rates, construction costs, and labour shortages, many of our clients who traditionally work in the residential development space are now seeking new opportunities.
Part of my role at Ratio is to look to the future which, as a town planner by training, is the part of being CEO that I love. My glass-half-full approach to life helps me to identify opportunities within the development sector and lead Ratio to provide the best advice for clients as they navigate what is a particularly complex era in the property industry.
Several sectors jump out at me as having significant development opportunities for our clients. Based on market intelligence and Ratio’s expertise, these are sectors which offer opportunities for the development sector whilst the market waits for conditions to realign for residential development to become attractive again.
Whilst residential in nature, we cannot underestimate the growing demand for speciality housing for our aging population. Whether it be retirement living, aged care, or residential villages, a combination of population growth, increasing life expectancy, and an aging population means that the demand for housing for the aged is increasing year on year by staggering margins.
Australia will see four times as many people over the age of 85 in 20 years’ time compared with today. This equates to 1.66 million people, who, combined with an increased living expectancy from 82 to 90 years will require 6 million years of care[1]. The numbers do not lie and show the potential demand for specialty housing for the aging population, particularly as consumer sentiment evolves to embrace a low-maintenance, resort-style retirement. I know I certainly will embrace a similar mode of living in due course!
The current value of the aged care industry in 2024 is nearly $30 billion. Significant opportunities exist for providers to grow their market share or for new entrants to enter the market. With an additional 1.2 million people entering into the 85-year-plus market in the next 20 years, the development opportunities are considerable.
Planning reform, including Clause 53.17 which recognises that aged care facilities have a different scale and built form to the surrounding ‒ often residential ‒ neighbourhoods, now enables the development of aged care up to 16 metres in height in all Victoria’s residential zones. With development in the Neighbourhood Residential Zone and General Residential Zone often restricted to 8 and 9 metres, this should provide opportunities in these zones to achieve higher yields necessary to create a quality aged care product.
Director William Bromhead, one of Victoria’s leading experts in planning for aged care and retirement living concurs: “There has never been greater demand for aged care and retirement living than now. The key is site selection and ensuring that a well-considered design response can successfully address the planning context whilst meeting the operational and functional needs of a successful facility.”
[1] Thanks for McCrindle Community Services and Health Industry Skills Council for the data
International students have been the backbone of Australia’s tertiary education program for decades. The sector plays a leading role in contributing to Australia’s economy, with China historically the largest source of overseas students. Last financial year, China contributed $8.7 billion to Australia’s education export income, with India emerging as another major contributor, generating $5.9 billion during the same period.
In terms of actual numbers, last year, 567,505 international students were studying in Australia, part of the post-pandemic boom, up 200,000 from the previous year. Australia’s strong university rankings, our proximity to Asia, and quality of student life are key factors in establishing our reputation as a top destination for tertiary education.
For Victoria, well-regarded institutions such as the University of Melbourne and Monash University, ensure that Melbourne remains a focal point for international students. The Federal Department of Education confirms that 165,700 students were studying in Victoria up to January 2024, with the student housing market worth $2.9 billion for the State last year. There is also strong demand for Student Housing in Sydney and Brisbane with 222,000 and 81,000 students respectively.
So, it is no surprise that we see considerable opportunity in the Student Housing market, not only in Victoria but up the east coast of Australia. The demand for rental accommodation from international students is part of the housing supply/affordability puzzle. Building more purpose-designed student accommodation will not only assist in freeing up more traditional housing for other households but will also provide accommodation more suited to the needs of students. The benefits of the communal aspects of student living should not be underestimated and work to create a greater sense of community and belonging for international students.
Simon Martin, Planning Director, who has extensive experience with student living development, is encouraged by the re-emergence in planning approvals in this area since the lifting of covid restrictions and the significant increase in international student migration numbers back to Australia: “Quality purpose-built student housing (PBSA) is re-emerging as a key opportunity area, particularly in locations close to tertiary institutions and activity centres.” These locational advantages are backed up by Brett Young, Transport Director, who confirmed several recent successes in significantly reducing car parking requirements for student living and greater interest in incorporating shared transport options such as car share and electric mobility charging capability and end-of-trip facilities.
With strong demand for accommodation for students, we are consistently seeing growing acknowledgment of the specific needs of this style of accommodation with very low car parking requirements, small room sizes offset by communal spaces, and proximity to tertiary education and activity centres.
CHILD CARE
With all the talk about the demand for housing for new residents to Australia, it can be easy to overlook the increasing demand for childcare. Across the eastern seaboard, Ratio is working with developers in New South Wales and Queensland, as well as our Victorian roots, gaining approvals for childcare centres in a vast array of locations and circumstances.
Whilst natural population growth in Australia is only a minor part of the growing demand for childcare, increasing participation in the workforce by traditional caregivers, changes to the funding of childcare, and an increase in the attendance requirements for 3- and 4-year-old kinder are big factors in the increase in demand. With 1.4 million children enrolled in childcare across Australia, we are still seeing strong demand for new centres in all states.
One third of all Australians live in a ‘childcare desert’, where children outnumber the available childcare places by 3:1 or more. Even in Melbourne, suburbs like Casey, Cardinia, Dandenong, Frankston, and Kingston have more than 30% of their population living in a childcare desert.
In Sydney, the demand for childcare is more dire, with many local government areas seeing more than 50% of its population living in a childcare desert. Suburbs like Liverpool, Bankstown, Campbelltown, and even regional areas like the Blue Mountains, Illawarra, and Kiama have 60-80% of their population living without reasonable access to childcare.
Edelene Loke, Planning Associate, works with several of our key developer clients across borders to gain planning approvals for childcare in Victoria and New South Wales. As with Nicholas Condoleon who is heading up our Brisbane office, Edelene has found “Attitudes to childcare still vary greatly across local governments and communities. There is no question about the importance of providing childcare. However, too much emphasis is often placed on protecting residential character, and navigating the planning process can be challenging.”
I have personally both used childcare and given expert advice on dozens of childcare matters in my career. I see no abatement in the demand for childcare and, whilst Australia remains an immigration-positive nation, there will be strong and ongoing demand for childcare with location a key factor in demand.
Image source: Mitchell Institute for Education and Health Policy
Three key stages of life also represent three key opportunity areas in the development industry at present: aged care, student living, and childcare. In reality, the better provision of aged care and student living are also part of the housing affordability/supply puzzle. There is a real opportunity for the development community to contribute to a solution whilst keeping Australia’s economy turning.
Ratio is well placed to assist with any opportunities or questions on these matters, across transport, planning, landscaping, waste management, and urban design. Please don’t hesitate to reach out to myself or your key contact at Ratio for more information.
