How Australia’s aged care model is evolving for the better

The retirement living and aged care sectors have changed dramatically over the decade Scott Meredith has banked the sector.

“The whole sector has evolved for the better to increasingly provide more flexible housing options for older Australians,” says Meredith, Director Corporate Client Coverage, CommBank.

“Traditional retirement communities have expanded, as has the fast-growing land lease community sector, largely due to retirees' desire for wellness and connectivity. From an aged care perspective, there has been a shift from institutional models to person-centred care focusing on dignity, autonomy and tailored support.”

“The whole sector has evolved to provide more flexible housing options for older Australians,” — Scott Meredith, Director Corporate Client Coverage, CommBank

How are seniors living models evolving?

Drawing on insights from the national portfolio, CommBank is seeing aged care and seniors living providers rethink how they design, deliver and fund care; creating models that are more connected, sustainable and responsive to how Australians want to age.

Integrated communities combining independent living, health services and social support are now a defining feature of the sector.

“This caters to the growing number of people who want to stay in one community as their needs change,” says Meredith.

Debora Singgih, National Director, CommBank Health agrees, noting “Having a wide range of options available in one place works well for residents and operators. Along with appropriate lifestyle and care for residents, the diverse revenue models can encourage investment.”

“Having a wide range of options available in one place works well for residents and operators. Along with appropriate lifestyle and care for residents, the diverse revenue models can encourage investment.” — Debora Singgih, National Director, CommBank Health

The cohort known as baby boomers, now aged 61–79, are driving many of these advances.

“Older baby boomers hold the largest portion of total net wealth compared with other generations,” says Singgih. “Over the next 10 years, the majority will look for lifestyle changes and some level of care. They have much higher expectations around the level of comfort and service support than previous cohorts.”

A push for better care

According to the Australian Institute of Health and Welfare, around 800,000 older Australians accessed home-support services and 213,000 received home-care in 2021–22, underscoring the shift towards flexible, needs-based care that allows older Australians to remain in their homes longer.

Many of the newer retirement villages and land lease communities could be mistaken for 5 star resorts.

“Fit and well people who have only recently retired want to live in a vibrant community with expansive facilities such as an indoor pool, ten pin bowling, spa, sports courts, cinema and cafe facilities,” says Meredith.

For Byron Cannon, CEO of LDK Seniors’ Living, evolving expectations are driving business-model innovation. LDK was created to replace traditional care facilities with communities where people can thrive as they age in place with privacy, comfort, lifestyle and freedom.

“The ‘One Move Promise’ is the cornerstone of our business,” says Cannon. “But it’s a big promise to make. Once you say to someone, ‘I promise you [won’t] have to go to a nursing home,’ that comes with the need to have strong care governance and care delivery, through dementia care and palliative care to deliver it.”

That promise is underpinned by LDK’s values of love, decency and kindness. “Nearly every decision we make is guided by those values. At a board level, we make choices that cost us money; that are counter-intuitive commercially, because it’s the right thing to do,” he says.

Cannon argues the entire industry is moving the same way. “The industry will have no choice but to evolve. When you look at trends, aging in place is increasing. People living in retirement villages have nowhere to go; we're not building enough residential aged care centres.”

"The care governance frameworks and compliance this service requires, need significant investment. It's a big step for a business to take, but as an industry, we'll be forced to make it. I'm grateful we [LDK] took that step when we started.”

While providers continue to prioritise independence and wellbeing, there’s increasing focus on helping residents remain within their community as their care needs intensify. Research from Macquarie University shows that the average length of stay in residential aged care experienced a decreasing trend between 2016–17 and 2018–2019. Length of stay is projected to continue falling at a slower rate through to 2040, reflecting later entry and shorter periods in care.

"The care governance frameworks and compliance this support requires, need significant investment. It's a big step for a business to take, but as an industry, we'll be forced to make it. I'm grateful we took that step when we started.” — Byron Cannon, CEO, LDK Seniors’ Living

Evolving business models

Historically, Refundable Accommodation Deposits (RADs) and Deferred Management Fees (DMFs) have been central to aged care and retirement living in Australia.

A RAD, an upfront payment for residential aged care, is refunded when the resident leaves. A DMF is a fee paid when a resident leaves a retirement village, usually based on how long they’ve stayed and how much they paid to move in.

“These have worked relatively well for the past few decades, but rising demand and financial pressures are now testing this business model,” says Grace Lloyd, Executive Manager, Healthcare and Seniors Living at CommBank.

“Operators must be able to reinvest to maintain their facilities, and they’re looking at alternatives such as daily payments instead of RADs to avoid the upfront lump sum or, in retirement living, combining a DMF with pay-as-you-go options for health and additional services. The focus now is sustainability for the operator, as well as choice and flexibility for the consumer.”

“The focus now is sustainability for the operator, as well as choice and flexibility for the consumer.” — Grace Lloyd, Executive Manager, Healthcare and Seniors Living, CommBank

Another consideration is what happens to any capital gain when a resident leaves a retirement village.

“Some providers retain all of the capital gain, a few return it in full,” says Meredith. “Others share it 50-50, typically with trade-offs in fees, flexibility or renovation costs.”

“The model will largely depend on the target market. For example, those in older age groups are probably less concerned about capital gain than the delivery and certainty of care, whereas capital gain is still very much front of mind for someone in their early 70s.”

At the same time, CommBank is observing a gradual shift toward user-pays and hybrid payment models, enabling residents to tailor care and manage costs more flexibly.

When providing development finance, the bank emphasises builder capability and delivery risk, ensuring partners have the stability and experience required to deliver complex seniors living projects.

The challenge of attracting investment

Although demand is rising, many operators struggle to attract investors due to fragmented regulation and rising build costs. “Many local and overseas investors consider the risk to be too high,” says Meredith.

Costs present another serious challenge.

“Since COVID, we’ve seen a massive rise in construction costs,” says Meredith. “They’re the same whether you’re building apartments in the centre of a city or in a regional area, but those in the city will bring much higher returns. As a result, we’re primarily seeing premium developments in more affluent areas.”

However, others see opportunities in the high demand for accommodation at all price points. “We expect to see more aged care providers working in partnership with not-for-profits and large investors" says Singgih.

“Lenders and financers need to recognise value beyond bricks and beds — there’s also value in service, wellness and continuity of care.”

“Lenders and financers need to recognise value beyond bricks and beds. There’s also value in service, wellness and continuity of care.” — Debora Singgih, National Director, CommBank Health

Recent data indicates the cost of new aged care developments has risen to approximately $200,000 to beyond $350,000 per bed, driven by high construction costs and strict compliance requirements. Acquisitions are an attractive option for some providers, but this can require significant reinvestment to modernise older facilities.

These conditions are contributing to the rise of vertical aged care models in metro areas, where facilities are integrated into multi-storey developments to maximise land use. CommBank is also observing the growth of community-style precincts that fit aged care with complementary facilities such as childcare, retirement villages and specialist disability accommodation (SDA).

Cannon stresses lenders can play a vital role in facilitating growth for businesses in the sector. LDK’s scale-up has been guided by unwavering banking support.

“Without the backing of CommBank, we wouldn’t have had access to the capital we needed to start our growth trajectory. They’ve been with us through it all.”

“Without the backing of CommBank, we wouldn’t have had access to the capital we needed to start our growth trajectory. They’ve been with us through it all.” —  Byron Cannon, CEO, LDK Seniors’ Living

From construction and development funding, to standing by the business through an ownership change and the most challenging periods of the pandemic, this partnership has been key in helping LDK maintain its solid footing.

With the new Aged Care Act having commenced on 1 November 2025, providers face stronger requirements for governance, quality and transparency, increasing the need for disciplined capital management, resilient operations and well-structured financing.

The role of supportive AI

Looking to the future, there’s no doubt technology, particularly AI, will reshape the sector.

“By automating routine tasks in administration and compliance, AI can give aged care workers more time to provide personalised care,” says Lloyd. “Hopefully, this will start to attract more people into the sector.”

“By automating routine tasks in administration and compliance, AI can give workers more time to provide personalised care. Hopefully, this will start to attract more people into the sector.” — Grace Lloyd, Executive Manager, Healthcare and Seniors Living, CommBank

Examples of where this technology is beginning to fold into daily workflows include predictive analytics that flag changes in residents’ health data, digital nursing tools that track medication schedules and remote monitoring systems that enhance safety and communication between care teams and families.

“Lenders who support the adoption of AI can work with providers to deliver better care, run the business more efficiently and build financially sustainable models,” says Singgih. “They can work in partnership with the operator rather than simply providing capital.”

CommBank has recognised this as a unique opportunity.

“We see our role as helping to finance the skills, systems, infrastructure and tools to enable operators to upgrade without compromising their liquidity,” says Singgih.

“We see our role as helping to finance the skills, systems, infrastructure and tools to enable operators to upgrade without compromising their liquidity.” – Debora Singgih, National Director, CommBank Health

More generally, CommBank will continue to deepen its expertise in the sector and develop tailored lending policies rather than simply repurposing finance for real estate.

“Our flexible capital structure offerings can help legacy operators transition into a more sustainable model as well as accommodate evolving solutions,” says Singgih. “We are well positioned to bring together operators, investors and policymakers to shape practical, forward-looking frameworks for the sector.”

All agree Australia’s older citizens deserve to age in comfort and safety and with respect.

“As individuals and as an institution, we’re committed to doing whatever we can to help,” says Lloyd.

Together, these demographic, regulatory and economic forces are validating innovative community models where residents can age in place across multiple levels of care. CommBank’s view is that operators combining lifestyle, wellness and care within a sustainable financial structure are best positioned for long-term success.