Demand for retirement village living will boom over the next 20 years with investment opportunities in the construction of new villages estimated at between $8–$19 billion, according to a University of Queensland study.
As baby boomers retire and age, significant new market opportunities for retirement housing and lifestyle products and services will be created across Australia’s metropolitan cities, in towns along rapidly growing coastal areas attracting sun-belt migration, and in some of the larger inland service centres.
The study findings are outlined in a new book, The Retirement Village Industry in Australia: Evolution, Prospects, Challenges, to be launched tomorrow (Wednesday, October 23).
Compiled by a group of researchers led by Professor Bob Stimson and Dr George Earl from UQ’s School of Geography, Planning and Architecture, it paints a rosy but challenging future for the Australian industry.
It is the culmination of a three-year study funded by the Australian Research Council’s industry collaboration scheme which analysed directions, prospects and challenges facing Australian retirement village financiers, developers and operators. It includes contributions from leading industry analysts.
Containing a wealth of data collected through a national survey of retirement village residents and village managers, it describes a typical retiree relocating to a retirement village as being aged between 71 to 73 years, emanating from a white-collar background, and only moving a short distance from the house they have owned and sold to purchase village access.
Professor Stimson said retirement village developers would be interested in the book’s modelling of the factors causing specific types of retirees to move to a village and the attractions sought.
“Our study showed retiree satisfaction levels with villages to be very high with the vast majority of residents saying they were now better off than they were before the move,” he said.
Professor Stimson will tell the Retirement Village Association of Australia annual conference in Perth that Australia’s ageing population alone will generate demand for the construction of more than 30,000 new independent living units in retirement villages across Australia in the next 20 years.
“But with expected innovations in new retirement village products and the trend for those retirees to seek specially designed housing and lifestyle environments offering affordable access, security and arrangements for progression to assisted living arrangements, our modelling shows that demand for new independent living units could exceed 79,000 over that period. Even with no increase in current levels of market-penetration, investment opportunities in new construction of retirement villages over the period to 2021 could be about $8 billion in current dollar values,” he said.
But if the industry achieves a three percent per annum increase in market-penetration, that new investment will increase to about $19 billion, according to Professor Stimson and Dr Earl’s research.
“Geographic concentration of the new construction will be quite specific. More new retirement villages are likely to be larger, incorporating upwards of 100 independent living units. This is in order to achieve improved economies of scale and incorporate more accessible and affordable housing for a wider socio-economic spectrum of retirees,” Professor Stimson said.
The study shows how the average resident in retirement villages today sold their home for between $150,000 and $199,000 and paid on average an entry cost to the village of $100,000 to $125,000, with on-going fortnightly service fees typically being between $100 and $150.
The typical resident has a surplus of about $50,000 in cash left from the sale of their home after meeting entry costs to their village.
The study identifies a number of significant problems and challenges facing the industry including the need for legislative and regulatory uniformity across state jurisdictions, greater certainty over taxation issues following TR2002/14, and a move to greater standardisation of contract documentation.
Professor Stimson and Dr Earl said the industry would continue to mature and become more dominated by a relatively small number of corporatised developers and operators across the states. The key role played by about a dozen church and charitable operators is likely to continue, but with less difference between the operators of both the not-for-profit and for-profit sectors.
Recent years had seen significant progress in quality assurance through the RVAA national accreditation process – co-ordinated “one-voice” national representation of industry interests was now possible, they said.
The study proposes the RVAA develop a national database to benchmark village project development and operational evaluation, acknowledging the poor competitive image of the industry for institutional financing as a previous impediment to its evolution.
It acknowledges the poor competitive image of the industry for institutional financing.
Modelling conducted by the UQ researchers demonstrates the potential for the industry to embrace strategic asset management and a portfolio investment approach for financing and operating new village projects.
They envisage a greater involvement of institutional funding, showing competitive rates of return are achievable from retirement village development vis-à-vis other property sectors if such an approach is adopted through partnerships between corporatised developers and operators and financial institutions.
Providing affordable access to retirement villages for retirees dependent on the age pension and eligible for rent assistance is identified as a significant but crucial challenge for the industry.
The Retirement Village Industry in Australia: Evolution, Prospects, Challenges, edited by Robert J Stimson, University of Queensland Press, is available from the University of Queensland Bookshop.
Media contact: Professor Bob Stimson (mobile 0411 020 627).
