Retirement Village Residents Decimated Financially

Retirement Village Residents Decimated Financially

Differing Financial Impacts on Retirees of Four Retirement Village Residential Occupancy Models.

The 2017 PwC/Property Council Retirement Census shows that:-

• 21% of retirees offered a retirement village occupancy model that has the capacity to completely decimate the amount due for repayment to the resident on departure.

• 20% of retirees offered a retirement village occupancy model that has the capacity to drastically reduce the ‘present day value’ of the amount due for repayment to the resident on departure.

The longer the period of occupancy the greater the damage done. It is quite possible for residents with a longer term occupancy period to actually have a debt to the operator on departure from the village.

All caused by the combination of factors:-

• The deferred management fee calculated on the exit price of the unit rather than the entry price.


• The increase in the value of the unit occupied (capital gain) retained by the village operator.


• The devaluing effect of inflation on the refundable amount (ingoing amount minus the deferred management fee) retained by the operator for their own use until refunded to the resident on departure.


• Fees paid to maintain an asset owned by the village operator.  A resident pays an ingoing amount often commensurate with an ownership cost but only obtains conditional occupancy.

Differing financial outcomes of four retirees over the four occupancy models.

The Property Council Census records the average occupancy period in a retirement village as 7 years. Table 3 below examines the financial journey of 4 retirees over this 7 year period, each choose a different occupancy model being offered by retirement village operators:-

1. 21% of Retirement Villages offer this accommodation model - Deferred Management Fee on the EXIT Price, Capital Gain to the Operator.  Financial outcome - Capital base of Retiree at Ingoing - $500,000.00 down to $ -2938.00 after 7 years. A weekly cost of $1377.91 for conditional residential accommodation.


2. 20% of Retirement Villages offer this accommodation model - Deferred Management Fee on the ENTRY Price, Capital Gain to the Operator.  Financial outcome - Capital base of Retiree at Ingoing - $500,000.00, down to $ 81,043.00 after 7 years. A weekly cost of $1150.98 for conditional residential accommodation.


3. 14% of Retirement Villages offer this accommodation model - Deferred Management Fee on the EXIT Price, Capital Gain to the Resident.  Financial outcome - Capital base of Retiree at Ingoing - $500,000.00, down to $237,094.00.00 after 7 years. A weekly cost of $ 722.26 for conditional residential accommodation.


4. 45% of Retirement Villages offer this accommodation model  - Deferred Management Fee on the ENTRY Price, Capital Gain to the Resident.  Financial outcome - Capital base of Retiree at Ingoing - $500,000.00, down to $321,121.00 after 7 years. A weekly cost of $ 491.42 for conditional residential accommodation.

Note:- A residential rental of a commensurate value property within the general community would be in the order of $480.76, a 5% per annum return to the landlord.

Table .

Currently there is no legislated protection for retirees against outcomes 1 and 2.

Retirement Village Residents Decimated Financially

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