For some time now, many commentators have warned about the numerous problems Australia’s ageing population will cause to Australia’s economy. The number of people over the age of 65 is set to grow at double the rate of the total population.
But there are multiple ways for investors to profit from an ageing nation. Most commentators have focused on the ‘obvious’ sector of rising demand for healthcare services, but not many have focused on the demand for aged accommodation, respite, transitional and personal care, and home care.
Many older Australians also don’t want a quarter acre block, a double-storey house, or a high rise apartment located just minutes from our central business districts. They want something that is low maintenance and decently priced.
Now retirement villages and aged care facilities can charge retirees a fortune on deposits, ongoing fees and in some cases, take any capital gain from the price appreciation of a unit, villa or apartment, once the retiree leaves.
The problem may retirees face is that they don’t have enough superannuation, assets or income to provide the lifestyle they would really like. Deloitte estimates the average retirement savings for an Australian male aged over 66 is a rather modest $151,000, and $133,000 for women.
As a result, many are being forced to look for cheaper accommodation and are moving into mobile villages and converted caravan parks. Colliers International’s Shane Nicholson has told Fairfax Media that lower priced manufactured housing is “the largest, fastest growing and least competitive band within the seniors living spectrum.”
Ingenia Communities Group (ASX: INA) is taking advantage of the move, buying up and converting traditional caravan parks. The company has acquired 15 parks since February 2013, and has a database of around 2,000 tourist parks to identify potential future acquisitions. Ingenia sports a P/E ratio of 22.2x and a yield of 3.4%, suggesting it’s expensive at the moment, but could be one to watch.
Likewise Lifestyle Communities Limited (ASX: LIC), which has around 1,800 sites under development or management, all within Victoria. Shares in Lifestyle may look expensive with a P/E ratio of 29.7x, but the company has an astonishing average annual return to shareholders of 45% over the past 10 years.
Interest in the sector is rising though, given the recent listings and share price appreciation of Japara Healthcare Ltd (ASX: JHC) and Regis Healthcare (ASX: REG), but many may still be underestimating the phenomenal potential growth.
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Motley Fool writer/analyst Mike King doesn't own shares in any companies mentioned. You can follow Mike on Twitter @TMFKinga