Investor Demand Builds for Specialist Disability Accommodation

Investor Demand Builds for Specialist Disability Accommodation

By Clem Stack, Knight Frank Sales Executive, Healthcare and Life Sciences

In spite of the increasing media focus on strategies to reduce the overall growth in the National Disability Insurance Scheme, the Specialist Disability Accommodation (SDA) sector is increasingly being recognised as a compelling healthcare property asset class.

While the sector has experienced rapid growth since the rollout of the National Disability Insurance Scheme (NDIS) began, a flight to quality is underway as sophisticated investors are becoming more selective when deploying capital. 

A bifurcation is emerging in the market between next generation accommodation delivered above current design standards, including such features as Class 3 certification, full building automation, and transitional care capability, and earlier, group home or legacy-style assets.  This divergence is driving a pronounced flight to quality as institutional investors increasingly concentrate on portfolio acquisitions of higher specification assets with the ability to install preferred SDA partners at settlement.

The Government’s Australian Press Club announcement in April focused on the long‑term sustainability of the NDIS signals a tightening policy environment, with greater emphasis on eligibility, safeguards and fiscal discipline. For the SDA sector, this may assist in the removal of less scrupulous operators and encourage an improvement in the quality of product being developed. 

The number of enrolled SDA dwellings was 11,642 across Australia at June 2025, which represented a 21% annual increase over the past two years and a 23% increase (2,155 dwellings) compared to June 2024. At the same time, demand from participants continues to outpace availability, with more than 25,000 participants approved for SDA funding, yet a significant proportion still seeking suitable accommodation.

A Sector Reset

In its early stages, SDA was largely driven by private investors and smaller developers attracted by the lure of significant government funding to seed a new asset class.  While this helped increase supply and awareness, it also created a fragmented market, with varying standards of design, build quality and asset management, in some instances causing product to be built in inferior locations with minimal tenant demand and structural vacancy. 

The original budget allocation within the NDIS for accommodation payments was $700 million, with only approximately 75 per cent of committed SDA funding currently allocated as at $517 2024-2025. There remains capacity for SDA funding packages to be issued and growth in the overall asset pool. Future demand is expected to favour inner metropolitan, high-specification dwellings that meet the nuanced needs of participants.

This points to a shift from rapid expansion to more disciplined growth, where quality will see stronger uptake in a high-demand, better regulated sector.

Quality, Location and Partnerships Define Performance

Knight Frank’s SDA and specialised accommodation transactions this financial year will exceed $25 million, and we are seeing strong demand from institutional investors with social infrastructure allocations for portfolio acquisitions in the sector.

Location is critical, with assets positioned within inner metropolitan and major regional growth areas with strong surrounding residential values attracting significantly higher interest from investors.

With empowerment of the individual to choose how their NDIS support package is spent being   a core tenet of the scheme, accommodation which offers a high level of amenity, accessibility to transport and established community facilities is highly sought after.  This contradicts the initial location selection processes of early developers who sought to build SDA properties in close proximity to hospitals, aged care and other similar healthcare infrastructure.

Equally important is the operating model. The pass-through lease structure is emerging as the dominant operating structure in the marketplace and is widely accepted by investors. This provides stronger incentive alignment and allows established management partners to maintain strong referral networks and deliver consistent care outcomes.

A full design pack is also now crucial to asset saleability. High-quality dwellings built to High Physical Support standards, incorporating sprinklers, building automation and assistive technology, are key to attracting the broadest tenant base. Building configuration is beginning to shift in line with tenant preferences, as developers move away from two-bedroom houses to focus on apartment and villa-style developments, which are preferred by participants.

As the SDA sector matures, the convergence of institutional capital, improved regulatory oversight, and participant centred design standards is creating a more sustainable and professionally managed market. Investors who prioritise quality construction, strategic locations, and experienced operational partnerships will be best positioned to deliver both strong returns and meaningful social impact in this evolving healthcare asset class.