Mitigate your investment risk profile
Expectantly, the largest concern an investor shares with us is “how do I know that there is demand?”
When investing in a SDA Property under the NDIS there is a reason why the NDIS have agreed to give investors significant rental income, and that is because a NDIS or SDA property includes features and benefits other residential property does not include. And what this means to you the investor is a requirement to be comfortable with a higher build price to include stringent NDIS requirements.
Now when one is paying more for a build, naturally one wants a higher yield for putting one’s hand up as an investor and committing to building a new SDA dwelling. And you also want some assurances that there are going to be ‘tenants’ to occupy your more expensive build. Yes or yes?
An astute investor also wants to ensure that they are mitigating their risk in building a Fit for Purpose dwelling at a higher build cost. And naturally inquire about demand.
Current and Future Demand
An article written in The Urban Developer today quote that “demand for specialist disability accommodation is expected to increase by almost 5 time the existing supply within the next 8 years.”
This does not include the requirement for new SDA’s to replace ageing and unsuited legacy dwellings which are no longer suitable for SDA participants.
How many new dwellings required?
“Up to 25,000 additional SDA dwellings will be needed across Australia by 2030” they go on to say. And this is only 8 short years away. That means a need for 3,125 dwellings per annum. That is huge you would agree!
Figures spoken about include 6.1% of all NDIS Participants will be approved for a SDA Package, meaning they will seek out SDA dwellings. By the year 2031, it is estimated that the NDIS will have 859,000 NDIS Participants, meaning that there will be around 52,417 Participants eligible for a SDA dwelling.
This (unfortunately) is a growing industry.
At the recent Disability Housing Summit, Laila Burnet said there are currently only 1,744 new SDA dwellings in the development pipeline. With 552 in QLD and 506 in NSW and the balance in other States.
Yes, this sector is gaining traction and although still in it’s infancy is shifting towards a level of maturity, but there is a huge amount of growth opportunity still to occur, Leila said.
By December 2021 there were 16,972 participants in 6764 enrolled SDA dwellings. A significant 4302 are old and primarily unsuited legacy stock and 2,462 new builds enrolled.
With an average of 1.45 participants per dwelling which results in over 30,000 dwellings still needed by June 2031. Currently it is estimated that only 5,760 new builds are in the pipeline. Not all suited to purpose of the Participant or the NDIS, unfortunately. See why here.
Leila stated that “we need to see a lot more development to meet that demand that is coming over the next eight and ensuing years as more people suffer disability and join the NDIS.”
The proportion of participants living in SDA who are looking for alternative dwellings has increased from a mere 1.8% up to a significant 11.3%. In QLD, one in 6 participants are currently looking for an alternative dwelling. Ensure you build with the Participant firmly in mind, is the lesson learned here.
According to the Health Care Providers Association, specialist disability accommodation has grown into a $2.5-billion asset class in just 5 years and poised to expand further on the back of a successful NDIS program, forecast to triple by 2023.
Leila Burnet said “projections from the latest data indicated there would be an estimated need for 52,000 SDA places by 2030”
NDIS quarterly report to disability ministers in December 2021, quote that 18,361 participants require SDA needs. Of this 1,843 participants with SDA were seeking alternative dwellings, whilst 2,014 were not in SDA dwelling seeking a vacancy. The vast majority being in QLD (21%) and NT (19%).
Interestingly current eligibility is 34% for Improved Liveability, 29% HPS, 20% Fully Accessible, leaving only 17% for Robust – contrary to what SDA marketing sales agent groups are telling you.
There is exceptionally little demand for SDA dwellings in Tas, ACT and NT according to latest figures in this report, compared to other States across Australia as a percentage.
Most eligible participants are in the 45 – 64 age bracket with 47% of applicants having an intellectual disability, cerebral palsy 11% and autism 10% being the 3 x primary categories yet the largest increase of SDA demand comes from a mist of neurological, stroke and multiple sclerosis participants.
Be cautious if wanting to invest in a HPS apartment for two primary reasons : firstly most participants packages will not be sufficient to meet quoted NDIS income rate. Meaning less income from the participant in your hands.
Secondly you may struggle to fill your apartment as most SIL providers will be unable to service apartments due to the cost of providing services for those needing full time care. Far more cost efficient to have one SIL overseeing 2 or 3 participants in a dwelling – compared to one SIL for one participant.
This program is working, still in it’s infancy, but maturing rapidly.
The demand for SDA funding is growing.
More participants are becoming aware of the Specialist Disability Accommodation Program and applying for funding.
Demand for new SDA builds continues to increase.
Avoid marketing hype appealing to your greed and fear of missing out.
Avoid cheap builds, a cheap build suits you not the participant, they won’t come or they will move out soon as a better SDA is built in their area.
Build with the Participant firmly in mind, invest more upfront in doing so, this way you will attract participants sooner and hold onto them longer.
From the article summarised for you above, there is an undersupply.
Work with a professional group who subscribe to a strong work ethic around SDA property, have floor plans suited to participants needs and who can educate you to make the important informed investment decision needed when wanting to invest in a SDA dwelling.
Out of the hundreds of hours of conversations we have shared with want to be investors, it is obvious that investing in a property under the NDIS is not suited to most investors attracted to the significant potential yields.
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Nice to have some balanced thoughts unlike many who just want your money offering high yields on paper, but not possible in reality
Hello Tony, thank you for your kind words. Yep, sad when the government launch such an excellent and much needed initiative that it attracts players who at your expense offer an unsuited end product – selling to your greed by touting high yields only achievable on paper. As an investor, please build fit for purpose of the NDIS and your participants.
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