Accommodation pricing in Residential Aged Care: Investability, supply and the importance of certainty

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Australia needs between 6,000 and 11,000 new residential aged care beds every year. In FY2025, net supply grew by approximately 800. Closing that gap requires sustained investment, and sustained investment requires the right conditions.

This report is Grant Thornton's independent assessment of whether those conditions exist. It examines the key financial, structural and regulatory factors constraining investment in residential aged care, and the conditions required to unlock it at the scale the sector needs.

The report was prepared during the consultation process for the Australian Government's independent Accommodation Pricing Review and reflects Grant Thornton's contribution to that policy debate. The Review was released on 22 April 2026, with the Government responding with a $3 billion investment package committing to 5,000 additional beds per year from July 2027.

With implementation now underway, this report provides the analysis providers and investors need to assess what the policy changes mean for commercial viability and what gaps remain.

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What the report examines

The immediate impact of the Review on the investment pipeline

Between 20 and 30 planned developments were deferred or placed on hold pending the Review, representing an estimated 3,000 beds delayed by 18 to 24 months. Any projects that are restarted will require a further three to six months before beds become available to residents. The impact on supply will be felt for years.

The economics of new development

With per-bed construction costs now widely acknowledged at $550,000 to $650,000, new development is increasingly focused on residents with greater financial means. This does not add beds where they are most needed. Without targeted policy action, the financial incentive to develop accommodation for supported residents will remain insufficient.

The structural barriers to new capital

New entrants face a circular impediment: approved provider status cannot be obtained until a facility is operational, but banks will not advance finance without it. The IHACPA pricing approval process presents a further barrier, preventing providers from obtaining room price approval for unconstructed facilities.

The sensitivity of new developments to pricing parameters

A sensitivity analysis of a representative 144-bed new build demonstrates that small adjustments to RAD values, retention rates and supplement levels can each reduce first-year EBITDA by more than $500,000. When those changes occur together, many planned developments become unviable. Getting the pricing settings right will determine whether new beds get built.

REPORT

Accommodation pricing in Residential Aged Care

Explore the full report to gain a deeper view of the key financial, structural and regulatory factors constraining investment in residential aged care.

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Get in touch

Whether you are a provider assessing development feasibility or an investor evaluating the sector, we can help you navigate this environment and position your organisation for what comes next. Contact us to discuss how this analysis applies to your situation.

Darrell Price

Principal & National Head of Health & Aged Care

Darrell has 40 years’ experience in professional services, the commercial, not for profit and public sectors in Australia. He has a strong track record in developing trusted relationships, leading strategic development, change, transformation, business optimisation and commercialisation in both external and client-side roles.

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