To downsize to a retirement village is where the value of their original capital base will be reduced and merely transferred to the retirement village operator.
For many occupants they will be taken to the point where they will need to go back to the federal government for increased financial support for the next phase of their life.
This seems at odds with other government policies of enabling older Australians to remain longer in the family home and thereby reduce pressure on aged care funding requirements.
The retirement village deferred fee business model increases the demand for aged care funding as it produces citizens that no longer have the capital base necessary to either return to the property market or to contribute to an aged care placement. A large portion of the capital base of older Australians is now in the hands of retirement village developers/operators.
Industry spruikers always advise that when you enter a retirement village it is not a property investment but a lifestyle investment. True but how expensive does that lifestyle have to be, in the example below (Option A) the lifestyle cost is $350,000.00 over just 7 years.
The following table shows that a retirement village (Option A) has the capacity to severely diminish the capital base of the occupant. Why would a legislator or regulator openly encourage an older Australian to go down this path given the likely financial outcome.
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