Retirement Village but at what cost?

As the baby boomer generation moves through that phase of their lives where they consider their retirement options, many will consider life in a retirement village. In fact governments are incentivising the move to downsizing from the family home with a retirement village well in the frame as one of the options to be considered.

For the boomer generation of property owners where values have increased year on year many will be shocked by the deferred management fee model highly promoted by village developers and favoured by governments and regulators. This deferred management fee model has many features contrary to what this generation has been used to, features unique to this sector of the residential accommodation industry.

Some of these negative features are:-

• Losing up to 35% of the amount paid to enter the village.


• The operator uses the remaining 65% of the amount paid to enter the village interest free until refunded on your departure from the village.


• No ownership only a conditional lease of the property, despite paying an amount commensurate with ownership values of a similar unit within the general community.


• Capital gain provisions are determined by the terms of the contract.


• The payment for all unit maintenance despite no ownership the property.


• The payment for full refurbishment of the unit on departure from the village .despite no ownership the property


• The payment along with the other village residents for the maintenance of the common areas and any recreational facilities despite no ownership the property.

As the industry points out the baby boomers are buying a lifestyle not real estate and whilst this is true the real question is but at what cost to the capital savings of this sector of the Australian population.

The table below takes the example of a retirement village with an in-going cost of $850,000.00.

It clearly shows what happens to the capital savings of older Australians over a relatively short period and the commercial values transferred to the village owner/operator within this period. The matter for governments and regulators to address is whether this $ amount as shown in the table for just one resident, for one short period, in just one village, is both reasonable and of course just.