Retirement Village

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GUEST OBSERVER
While you may think signing a retirement village contract is similar to buying a house or apartment, it isn’t.
Retirement village contracts resemble insurance contracts more than purchase agreements, only they aren’t regulated like insurance products. 
The lack of regulation increases the risk for retirees. They face considerable delays in receiving their payments when they leave, costs due to the delay, and the potential loss of all payment from companies that don’t need to meet the financial standards of an insurance company.
Most retirement village contracts provide the consumer with a combination of the right to reside in the retirement village (until death, incapacity for independent living, or voluntarily relocation) and an “exit payment” upon leaving. As both the amount and timing of this payment depends on the resident’s death or ill health, the payment is a de facto insurance payout.
This makes the retirement village contract a combination of the right to reside and a de facto insurance policy. But the insurance policy comes from companies that wouldn’t normally be allowed to sell insurance.
Retirement villages are mostly small private companies or not-for-profit organisations. This means they aren’t required to publish their annual financial statements, hold reserves, or have reinsurance arrangements like an insurance company. The consumer can’t be confident that the retirement village is financially healthy and able to pay out the exit fee, due to the absence of information about their accounts and financial condition. 
<h2>Fees and more fees</h2>
There is a great variation in the structure of the fees that retirement villages charge – entry fees, ongoing fees and a so-called “<a href="https://www.fairtrading.nsw.gov.au/Factsheet_print/Tenants_and_home_owners/Retirement_villages/Leaving_a_village/_Departure_fees.pdf">deferred management fee</a>”, which is an amount taken out of the money refunded to departing residents.
These fees <a href="https://www.retirementliving.org.au/industry/services/census/">can be substantial</a> – the entry fee alone is often comparable with the cost of buying an apartment. Although the amount varies by location, one operator told a <a href="https://www.propertyobserver.com.au/https://www.parliament.vic.gov.au/lsic/article/2972">Victorian parliamentary inquiry</a> the entry fee was equivalent to 80% of the cost of a house nearby.
A retirement village contract might have an entry fee of A$1 million, a deferred management fee of 6% of the entry fee per year of residence, and a maintenance fee of A$500 per month. 
For a contract with a A$1 million entry fee, after five or more years of residence, the deferred management fee is A$300,000, so the exit payment is A$700,000. But the deferred management fee can vary greatly. It may be 10% per year for three years, or 3% for 10 years etc.
The exit payment can also include some share of the resale value of the apartment. But the retirement village needs to be able to pay out this exit payment.
<h2>The need for proper regulation</h2>
The assets held by retirement villages are almost all invested in real estate. This is risky, as they aren’t diversified and their assets can’t be easily turned into cash. 
When a retirement village has to pay a departing resident their exit payment it may take a long time to sell their apartment, which could involve a loss on resale. This can also lead to delays in receiving exit payments.
After signing their retirement village contract, residents are also in a weaker bargaining position than a traditional tenant in a normal pay-as-you-go rental arrangement. This is because residents have already paid their rent in advance for the rest of their life, and it usually costs a lot of money to get out of these contracts. 
In some retirement village contracts the resident may be forced to spend a lot of money on renovations – such as for a new bathroom and kitchen – so that the apartment can be sold and they can get the exit payment. 
This issue is compounded by the complexity of the contracts, which can be hard <a href="https://www.propertyobserver.com.au/https://www.parliament.vic.gov.au/lsic/article/2972">for both consumers and financial advisers</a> to understand.
This creates substantial risk for consumers, and the lack of a requirement to publish financial statements and related information makes it very difficult to assess the financial soundness of a retirement village operator.
If retirement village contracts are in fact insurance agreements, then they should be regulated differently – by the Australian Prudential Regulatory Authority and not by state governments, as is now the case.
If retirement villages were properly regulated then consumers would be better protected from failure of operators and better protected from delays and capital losses when they get their exit payment.
Timothy Kyng is Senior Lecturer, Department of Applied Finance and Actuarial Studies, Macquarie University and author for The Conversation. He can be <a href="https://theconversation.com/profiles/timothy-kyng-386308" target="_blank">contacted here</a>.
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Why retirement village contracts need to be regulated like insurance

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If the only inevitabilities in life are death and taxes, then the economy and government policy will start to reflect it.
This is particularly evident when the baby boomer generation goes through the significant transition to retirement.
In March 2017, an unprecedented value of building work was approved in construction of aged care facilities, totalling $340 million over the month.
Australia’s population aged 65 and over is an estimated 3.7 million people by the Australian Bureau of Statistics (ABS). Approximately 5 percent are living in retirement communities, or some 184,000 Australians. Based on current projections, Australians aged 65 and over will make up over 20 percent of the population in 10 years’ time.
Despite a rapidly ageing population, the reality of developing aged accommodation – particularly retirement villages – is a harsh one. Like many assets, growth in the residential housing market has crowded out capital for aged accommodation.
According to a 2016 joint survey by the Property Council of Australia and Retirement Living, the national average price of a standard, two bedroom independent living unit increased just over 3 percent between 2015 and 2016. In the same period, CoreLogic data shows the national standard dwelling increased 7.3 percent.
Competition for vacant land, age friendly regulation compliance and investment into green technology to reduce long term service fees are factors that can inflate initial investment. This is amplified by the average tenure in retirement villages, which is approximately 12 years.
However, some areas across the country lend themselves to aged care development. Advantages such as relatively affordable land and mild climates make them popular with retirees. New incentives to downsize introduced in the federal budget may further boost these areas.
CoreLogic data of aged care facilities, independent living units and retirement villages reveals the areas most likely to benefit from the ageing population.
Of the states and territories, the most aged accommodation construction is occurring in New South Wales. The state has 113 projects with construction commenced or imminent over the next five years.
Within New South Wales, the highest frequency regions for construction were The Hills Shire, Newcastle, Wyong and Gosford. Between these regions, there are 26 aged care accommodation projects either approved or commenced, with completion expected by 2023. Newcastle, Wyong and Gosford offer lower land prices along the coast. As for the Hills Shire, while its lack of public transport to the city makes it relatively unattractive for young professionals, the area has a quiet, leafy exclusivity for retirement communities.
The number of aged accommodation developments in each state and territory is generally proportionate to population. The exception is South Australia, where there are 56 developments expected to be completed over the next few years. Of these, 10 are located in Onkaparinga Council, and 6 are located in the Port Adelaide Enfield region. South Australia has a higher proportion of 65’s and over to the total population.
Looking at individual council areas, Brisbane City is by far the most popular spot for aged accommodation projects. In the last 5 years, the region has seen over $725 million in aged care and aged living construction, ranging from upgrades of existing facilities to a $60 million integrated care facility at Carina. By 2020, a further 22 projects in the space are expected to be completed. In the same period, a further 11 are planned for the Moreton Bay Regional area, 9 in the Sunshine coast and 5 in Toowoomba.
A common trend in new developments is the blending of care types in the one precinct, such as the three tiered levels of care in The Village Coorparoo, mean that people are likely to stay on the one site for a longer period of time, or, ‘age in place’. The ageing in place model was also adopted in the recently completed Woodlands Aged Care Facility in the Sunshine Coast.
In the residential care sector, the Aged Care Financing Authority estimates that over the next decade, approximately 76,000 new places will be required, compared with just 35,000 established in the previous decade. In addition, much of the existing stock will require a knockdown and rebuild. The forecast investment required over the next decade is $33 billion. While the initial costs make aged accommodation unappealing for the average investor, the boomer retirement transition could represent a further boom for the construction industry.
Cameron Kusher is head of research for CoreLogic. You can contact him <a href="https://blog.corelogic.com.au/about/" target="_blank">here</a>.
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The areas capitalising on an ageing population: Cameron Kusher

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EXPERT OBSERVER
The COVID-19 pandemic has brought into sharp focus the need for connection to our local community and the health challenges of the retirement village model.
We know that, as we age, most people prefer to stay in their own homes and communities instead of moving to retirement villages. Some have gone so far as to say retirement villages have had their day. However, the reality is not quite that simple.
The challenge is that seniors are not well informed on what they could demand of the market. Planning schemes could also do more to create incentives for the changes we need now.
The challenges are complex and urgent as the global population grows and ages. Yet our housing supply reveals a bad case of the tail wagging the dog. Finely tuned financial models and development processes are driving the housing products available in the market.
What’s needed instead is adaptable housing and neighbourhoods to help people as they move through life’s stages.
<h2>Are the days of the retirement village numbered?</h2>
Many individuals and families struggle to find the right “fit” between the supported living options of retirement villages, independent living lifestyle villages and staying in the (often unsuitable) family home as their needs change.
Such villages offer viable products in the market as an important part of the housing mix. The models have some advantages in that they:
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are thoroughly costed and provide a good return for developers
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offer a range of living options to suit most budgets and level of care needs
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promise security, activities and a sense of community.
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<h2>Seniors are best placed to say what they need</h2>
However, <a href="http://research.usc.edu.au/vital/access/manager/Repository/usc:7983" target="_blank">our research</a> with seniors in south-east Queensland revealed a desire to “age in neighbourhood” and to have neighbourhoods with a mix of ages and building forms.
Planning schemes could drive this now by giving priority to, and providing incentives for, sustainable and accessible housing close to transport and other services.
We worked with more than 42 seniors in south-east Queensland to design a series of housing types. These were based on what they told us were important to them in a home and a neighbourhood.
The table below summarises the key features that they told us make a neighbourhood and a home a good place to live as they age.
<a href="https://images.theconversation.com/files/341377/original/file-20200612-80774-k4gbny.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=1000&amp;fit=clip"><img src="https://images.theconversation.com/files/341377/original/file-20200612-80774-k4gbny.png?ixlib=rb-1.1.0&amp;q=45&amp;auto=format&amp;w=754&amp;fit=clip" alt=""></a>
The resulting principles and housing types paint a vivid picture of what older people in a subtropical environment find appealing and supportive as they age.
Many participants preferred an accessible home on one level. Ideally, it should have two bedrooms and a study. This means it can easily be adapted to changing needs.
An essential component for our participants was to take advantage of the mild climate by having both private and shared outdoor spaces. Here they could socialise, relax and enjoy pleasant outlooks from the home. Cutting planning requirements for car parks by 50% could add more shared outdoor space and cut housing and living costs for residents.
Homes should be sustainably designed. This means they capture natural light and prevailing breezes for through ventilation, take into account privacy and noise considerations in higher-density areas, and have solar and rainwater harvesting systems to save resources and money.
Also important was a neighbourhood with a variety of green, clean and safe public open spaces. This includes flat, well-maintained and shaded walkways for exercise and easy access to shops, facilities and public transport.
We then showed how all these housing types could be incorporated into one Brisbane suburb, as the image below illustrates. This would mean seniors could remain in their neighbourhood in more suitable housing, reducing the stress of moving to unfamiliar surroundings.
<h2>How to make it happen</h2>
As with all complex challenges, everyone has a role to play in achieving these goals. However, local government planning reforms can act as a catalyst for the market to change and innovate.
Planning schemes could, for example, reduce application fees for developments that include accessible or universal design within 400-800 metres of key services, facilities and transport.
Carpark allocation could also be uncoupled from housing in locations close to transport and services. This would reduce the cost of housing and encourage greater used of active (cycling, walking, etc) and public transport.
This research clearly signals to local and state government, developers and small-scale property investors how houses, duplexes and mid-rise apartments could be put together in an age-friendly suburb. This transition to mixed-density infill development would support what we call “ageing in neighbourhood”.
Further, this research suggests planning “priority zones” could give the market the incentive to invest in the future-focused neighbourhood development it should be providing to keep people connected to their community.
This article was co-authored by Phil Smith, Associate Director of Deicke Richards at the time of publication of the research report. Phil Smith is Director of Gomango Architects.<img src="https://counter.theconversation.com/content/138729/count.gif?distributor=republish-lightbox-basic" alt="The Conversation" width="1" height="1" style="border: none !important; box-shadow: none !important; margin: 0 !important; max-height: 1px !important; max-width: 1px !important; min-height: 1px !important; min-width: 1px !important; opacity: 0 !important; outline: none !important; padding: 0 !important; text-shadow: none !important;">
<a href="https://theconversation.com/profiles/caroline-osborne-90671" target="_blank">Caroline Osborne</a>, Postdoctoral Research Fellow, Office of Community Engagement, <a href="https://theconversation.com/institutions/university-of-the-sunshine-coast-1068" target="_blank">University of the Sunshine Coast</a> and <a href="https://theconversation.com/profiles/claudia-baldwin-248780" target="_blank">Claudia Baldwin</a>, Professor, Urban Design and Town Planning, Co-director, Sustainability Research Centre, <a href="https://theconversation.com/institutions/university-of-the-sunshine-coast-1068" target="_blank">University of the Sunshine Coast</a>
This article is republished from <a href="https://theconversation.com" target="_blank">The Conversation</a> under a Creative Commons license. Read the <a href="https://theconversation.com/ageing-in-neighbourhood-what-seniors-want-instead-of-retirement-villages-and-how-to-achieve-it-138729" target="_blank">original article</a>.
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What seniors want instead of retirement villages and how to achieve it

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The NSW Government has signalled it will ensure there are more transparent fees for retirement village residents through new laws.
They will also seek to ensure that exit entitlements paid more quickly when residents depart their village.
Minister for Better Regulation, Kevin Anderson, said the new reforms will improve access to exit entitlements, create a new mechanism to support residents moving to aged care, and place a 42-day cap on the payment of recurrent charges for general services.
“We promised to make retirement village fees fairer, and these reforms will put residents first, saving them thousands of dollars and giving them access to their exit entitlements sooner when they leave the village,” Mr Anderson said.
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Under the changes, if a unit remains unsold after 6 months in metropolitan areas or 12 months in the regions, residents will be eligible to receive their exit entitlements if the village operator has not taken reasonable steps to facilitate a sale. The reforms respond to several key recommendations of the independent report into NSW Retirement Villages conducted by Kathryn Greiner AO, which found residents could wait years for their unit to be sold by the operator before they received their exit entitlements. “Waiting extended periods of time to receive your exit entitlement can cause a financial and personal burden. That’s why we’re putting in a safety net that will require operators to buy back the unit from the resident if they don’t use their reasonable endeavours to sell it within the appropriate time period.” “We’re also capping recurrent charges, such as office management and gardening fees, at 42 days after a resident moves out.” Mr Anderson said the Government is also making it easier for retirement village residents to transition directly into aged care. “More than 60 percent of residents transition from villages directly into aged care accommodation. However, under the status quo, many can’t afford these costs if their unit does not sell quickly.” “Under the reforms, the operator will need to cover a portion of the estimated exit entitlement directly to the aged care provide, allowing a seamless transfer.” Retirement villages currently accommodate over 66,000 retired people, and this number is expected to double by 2033. New laws to deliver on the reforms will be introduced into the Parliament later this year.
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Retirement village residents to get greater fee transparency

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A former industrial field support centre in Sydney's outskirt suburb Minto has sold to the Anglican Retirement Village for $16.6 million through an expressions of interest campaign.
The 5.88 hectare property, located on the corner of Sark Grove and Pembroke Road Minto was sold on behalf of Endeavour Energy by Savills agents Robert Lowe and Ray Trimboli.
Future development of the site may include up to 100 residential lots with a size range expected to be from 300 square metres to 476 squares metres (approximately) subject to Council approval. 
 
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Anglican Retirement Village buys Minto site

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Property and construction company Hindmarsh has begun construction of its Marigal Gardens retirement village in Kambah in the Australian Capital Territory.
The first 18 villas in the initial release of 30 have sold.
In April, Hindmarsh received approval for the first 71 architecturally designed homes at Marigal Gardens. 140 units are planned.
The first Marigal Gardens residences and the community leisure centre are expected to be completed in the first half of 2017. The release of a further 10 villas is planned this year. 
The new community leisure centre, which will be a key meeting place for Marigal Gardens residents, is currently before the Planning Directorate for approval. 
Marigal Gardens is being developed by Hindmarsh on a 3.6 hectare site on the corner of O’Halloran Circuit and Snodgrass Crescent in Kambah. 
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The homes will include a mix of 2 or 3 bedrooms with 1 or 2 bathrooms, priced from around $425,000 to $600,000 and designed to take advantage of the site’s convenient location while celebrating the natural beauty of the Tuggeranong Valley. 
For more information, <a href="https://www.marigalgardens.com.au" target="_blank">click here</a>.
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Construction begins at Marigal Gardens retirement village

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Specialised developers Halcyon has made almost $38 million in sales this year from its over 50s communities in Queensland's Sunshine Coast region.
Halcyon Lakeside at Bli Bli has sold 51 homes totalling $27 million while Halcyon Glades at Caboolture Nort has picked up 24 sales valued at $10.5 million.
Bevan Geissmann, Halcyon joint managing director said the Sunshine Coast is a natural market for Halcyon because it is favoured by retirees because of climate, affordability, range of amenities and easy access to Brisbane.
He said another key to Halcyon’s sales success was the diversity of its product in the Sunshine Coast region.
“We have entry-level homes at the sub $400,000 price point available at both communities but also premium residences at Halcyon Lakeside,” he said.
“It means we can appeal to a wider cross-section of the retirement market." 
 
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Halcyon tapping retirement hub with $38m in sales

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A Central Coast horse stud farm is set to become a home retirees after selling for $12 million through McGrath Terrigal agent Mat Steinwede. 
Bangaloe Stud is a 24ha property between the suburban neighbourhoods of Avoca Beach and Kincumber.
Living Choice bought the sprawling Kincumber acreage from Danny Bourke.
It anticipates making the property at <a href="https://www.realestate.com.au/property/253-avoca-dr-kincumber-nsw-2251">253 Avoca Drive</a> into a unique coast-meets-country retirement village.
Bangaloe Stud owner Danny Bourke took on the property almost three decades ago. 
Living Choice NSW Central Coast general manager, Tim Bentley, told News Ltd that the company planned to include a retirement village and an aged care facility in their development application.
It will be Living Choice’s fourth retirement village on the Coast behind established facilities in Davistown, Woy Woy and across the road in Kincumber.
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Central Coast horse stud bought for retirement village

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Aura Australia has purchased three hectares of land in Brisbane's south-west suburb of Corinda to develop the $130 million Kingsford Terrace retirement living village, due for completion in 2021.
The current Kingsford Terrace retirement village project will be expanded from 34 to 250 architecturally designed, purpose-built one-, two- and three-bedroom independent living units (ILUs).   Blue Sky Private Real Estate will develop the project, which Aura will operate.
Aura is headed by former chief executive officer of Retire Australia, Tim Russell.
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