63 per cent of all current NZ villages have a full aged care facility on the same grounds, as well as serviced apartments.
It has been open secret that the New Zealanders do one thing better than we Australians and that’s retirement villages.
Their model is only slightly different to Australia’s but it is attracting new residents at an accelerating rate.
A new study by Jones Lang LaSalle reports that village homes for an additional 9,000 residents have been built and sold in New Zealand (NZ) in the past three years.
Coincidentally, by our back-of-the-envelope figures (which are pretty accurate), we have built about the same number of village homes to accommodate 8,930 new people here in Australia.
But the thing is, Australia has five times the population of its trans-Tasman neighbour: 24 million people compared to 4.5 million people in New Zealand. Otherwise our demographics are largely the same.
In New Zealand, 10.5 per cent of all people aged 75+ live in a village and that figure is growing at one per cent each year. In fact six per cent of all new homes built in NZ are in retirement villages.
Here in Australia it is just under eight per cent and each year it is shrinking.
Same but different
So what is different and what is the same?
What is different is that they place great emphasis on two things: one is a clear care path; and the other thing is total certainty for residents on all the costs involved in being in the village.
Looking at the care path, 63 per cent of all current NZ villages have a full aged care facility on the same grounds, as well as serviced apartments. Residents know there is nursing staff on site 24/7, plus they have a clear pathway for care and support, if and when they need it.
All new NZ villages being built have aged care on site and the profit from the village subsidises the aged care operations. In Australia, it is not very common to have aged care on the same village site.
In terms of costs, weekly village fees in New Zealand are fixed at the rate they are when the resident first enters the village. Residents there can budget with certainty because there are no annual fee increases.
In Australia, fees increase annually by the CPI (Consumer Price Index), except for utilities and taxes which are not controlled and usually exceed CPI increases.
No shared capital gain
Like Australia, New Zealand charges a Deferred Management Fee (DMF), usually around 30 per cent, to residents on departure from the village. But in NZ, the resident never gets a share of any capital gain.
While not-for-profit retirement village operators in Australia have rarely shared the capital gain with residents, private village operators have traditionally shared capital gains on a 50/50 basis with the resident.
If the value of your village home goes up during the time you’re there, you get 50 per cent of the increased value from the sale. Not in New Zealand.
Like Australia, New Zealand residents have to pay for reinstatement of their village home when they leave – replacing stained carpets, painting etc – but there is no charge in New Zealand for the full rebuild of kitchens and the like and no marketing or sales fees.
Generally, NZ village homes match the traditional purchase formula in Australia where a village unit would sell for around 80 per cent of the cost of an equivalent home outside the village – say, a two bedroom village unit versus a two bedroom home.
But here in Australia, village homes are currently costing far less than a similar home ‘over the fence’. Even new village apartments are costing less than an equivalent, mainly because of lower demand.
The bottom line
In summary then, why does New Zealand have higher demand for retirement village homes than Australia? Especially as resident satisfaction scores are similar for both countries.
The answer appears to be three factors at work in the New Zealand situation that older people find very appealing:
- The clear care path – with onsite nursing backed up by home care, serviced apartments and residential care – which enables people to plan their future, making choices that will provide the least disruption to their lives.
- The clear upfront understanding of the costs – both while living in the village and on departure – has obvious appeal.
- There is also a greater acceptance of ‘village living’ and its value proposition, in the general community. There is an acknowledgment that it costs money to live in a village but you pay when you leave. And in return you don’t have to worry about your future. You have mapped it out for yourself.
Australian operators, like Aveo and a number of not-for-profits, are now moving in the NZ direction. Does it make sense in the Australian setting? Is this the right direction for Australian villages or not? We think it is but we’re interested in your opinion.
