…if you live in a village, be thankful you made the move when you did. Because these are the best of times.
With my work in the retirement field over the last 10 years, I have visited over 250 retirement villages around the country and seen a number of changes and developments. And I am pleased to report that life for those living in a retirement village has never been better than it is today.
A growing population of people over 65, contrasting with a low number of villages being built means that right now there is more demand for retirement village units than ever before.
We all know what this means: unit sale prices are going up, village operators and residents are benefiting from the better prices and there are funds around for operators to spruce up the facilities.
On the flip side, those looking to buy a retirement village unit face increasingly longer waiting lists and many are likely to be disappointed. A survey we conducted of 209 villages across NSW just before Christmas found that 70 per cent had no vacancies and long waiting lists. And we predict those waiting lists will only get longer.
To give you a really tangible idea of demand, last week alone 15,250 people searched our retirement village directory website, villages.com.au, looking at their options. That is 40 per cent more people than the same week 12 months ago. However, in that same week, only 385 homes came onto the market.
We know from our website data that these people were serious prospectors – they looked closely at an average of four villages each from the 2,000 we have listed. We are routinely seeing this kind of research investment, a reflection of the magnitude of the decision people are making when purchasing a home that they plan to spend the rest of their life in.
But the mismatch is a growing concern: more people looking to buy but fewer homes available. And this supply problem of village homes is not going away.
Based on forecasting data, Australia needs to build 5,500 new village homes – the equivalent of 55 new retirement villages – every year for the next few years but increasing just to keep up with population growth. This year we will build just 2,600 homes. So unfortunately we are going backwards – and at an accelerating rate.
As I said at the start, if you already live in a village, this is probably music to your ears. People buying in should be paying increasing prices and this should flow on to residents in the form of better community facilities and services as village owners reinvest to keep their villages fresh and appealing.
If you share in the capital gain when your village home is sold, you obviously are going to receive more when you sell. Bonus!
“… taking a broader perspective than the current scenario, this mismatch of supply and demand cannot be sustained.”
Future prospects
But looking ahead and taking a broader perspective than the current scenario, this mismatch of supply and demand cannot be sustained.
Older Australians will not continue to benefit from the security, support and community afforded by purpose built seniors housing – and those who do will pay increasingly higher prices – unless there is an increase on the supply side.
So why aren’t more villages being built? A major reason is that developers can make more profit out of building ordinary residential homes and it’s much less complicated for them. They don’t have to worry about legislation and regulations behind the Retirement Village Act and they can just sell the homes and move on. They don’t have to stay with the residents for the next 10 years.
Then you have to look at the amount of cash that is required to build a village. To build those 5,500 village homes a year will require $1.65 billion to be spent in 12 months (that’s $32 million a week). Banks, superannuation funds and other investors have to provide this but at the moment bankers can get a better return elsewhere.
Then there is the other good news: we are all living longer. At the moment the average stay in the village is 10 years, which means in a village of 100 units, 10 new homes will become available each year. But that 10 year average is already dribbling out to 11 and 12 years in some villages and is set to grow. Great for residents but it doesn’t help those on waiting lists to buy.
So the message is, if you live in a village, be thankful you made the move when you did. Because these are the best of times.
But if you are considering a move to a retirement village, or have friends who are considering the village option, the advice is to make a move sooner rather than later. Not only may it take time to find a vacancy in the village they want, chances are that home may be less and less affordable.
Discussion8 Comments
Pity your memory is so short . The was another Speaker known as Leaping Leo .
If you choose to make political comments please do not repeat the lies of our politcians and get facts on your own.,
Hello Frank,
I, too will be frank. I am sorry to disagree with your conviction that living in a retirement village was never as good as it is now and will continue to get better. I understand the theory, but in practice, reality is a different story.
A survey of rv residents done by villages.com.au not all that long ago covered only residents who had been in their village for less than two years. They were still wearing rose-coloured glasses. It can take two years for people to realise that their expectations are not being realised, and they are financially
trapped by the “deferred management fee”, unable to move out to live elsewhere.
Take residents who have lived in their village for 10 years or longer: so many villages have recently been bought by the major operators that most of these residents have seen an erosion of the services they came to the village to enjoy. I live in a Lend Lease village and I can tell you, the impression we get is that Lend Lease does not give a hoot for its residents, even though without residents the village is a failure. Lend Lease just wants to make money, cutting costs wherever it can but not reducing our fees. Just about all the services we came here for have been done away with, despite protestations from residents. Just because every detail was not in black and white in the lease, LL will not listen to these complaints. The village is far from the happy place it used to be, a village with a heart: that is gone. The undercurrent of dissatisfaction is palpable. Lend Lease should be worried, but does not appear to want to rectify the situation.
Worse, residents may find that they are in a village where there is constant conflict; one group of residents trying to dominate over another. Such friction is unhealthy, but is an unfortunate consequence of personalities vying with each other for “power”. Petty, but a fact of life in many retirement villages.
Further, it is misleading to say that if a resident is on a capital appreciation lease they will get more when they leave. In a sense, that is true: they will get more than someone who does not share in the capital gain, but they are not likely to get more than they paid! After the Exit Fee, and reinstatement costs (which with some operators are seriously greater than is reasonable) they end up with less than they paid to come in.
Many of us ask WHY DID WE EVER MOVE INTO A RETIREMENT VILLAGE? Life here is not good.
Sorry, Frank, but this is my experience of retirement village living, and I am far from alone with this point of view.
Joanne Wheeler
Joanne Wheeler has hit the nail on the head and she knows what she is talking about. A Lend Lease retirement village resident is one who falls to the blandishments of the company’s sales people. Once the removalist boxes have been unpacked, however, the new resident comes under the control of the company’s management people. Oh what a difference! Promises to rectify problems seldom come to fruition. The frequent issue of new village rules and the amendment of existing ones are incomprehensible, unenforceable, often childish, stupid and without clear explanation. The perceived intention of all this ridiculous bureaucratic prescription has nothing to do with benefitting the village residents but has everything to do with advancing the edicts of the company. In our village, as with many others, we have a Residents’ Committee whose job is to promote the interests of the village residents by conferring with Lend Lease and its managers on the day to day to running of the village, including dealing with all reasonable complaints or proposals raised by the residents. Sadly, for three years or more, this body of residents representatives have been found wanting in great measure, choosing to side with management instead of the residents. In summary, in our village we have been ill-served by the owners, the managers and our representatives. Truly, a very unhappy situation.
Hi John,
Sorry for the late reply, I have been travelling and the internet has been VERY patchy.
I remember Leaping Leo McLeay very well. He was censured once on a no confidence vote called by Hewson and later resigned on claims of fraud that were later found to be unproven.
The basis of my comment were the facts that we presented in the story of the bias that is clearly evident with Bronwyn. These facts were not provided by politicians.
As a keen political observer I am sure you must be equally concerned that our democracy and policy debate system is being ridden rough shod over?
Frank (AKA Chris)
Hi Joanne,
And thanks for your lengthy reply to my article.
Responding to your points, you mention the research conducted by villages.com.au (which I am the publisher) and that the research only covered residents that had joined a village in the past two years.
This is not correct. In the 2013 research program we surveyed 5200 residents across more than 200 villages nationally. 1050 of them had moved in the past 24 months – the other 4150 had moved up to 25 years before.
Equally in 2011 we surveyed another 10,600 residents in different villages to 2013, again with a small percentage who had moved in the past 24 months.
These surveys were totally random and in most cases captured close to 100% of all village residents. they covered both large and small private operators and not for profit operators.
The consistent results across 2011 and 2013 was a ‘satisfaction’ result exceeding 94%. This was measured by the question “How happy are you since moving into your retirement village”, with 94% saying ‘Fairily happy’ to ‘Exceedingly happy’.
Regarding the Deferred Management Fee creating a trap, it is a fact that there is a cost to living in a village and that cost is paid when you leave. This is clearly explained in the information provided to potential residents but many do not take the time to fully understand what they are being told. We agree that the contracts are also confusing and join with the ARQRV in QLD advising people to get legal advice to fully explain the contracts before signing. (I have an interest in Villages Legal Services which does just this for a flat rate of $1000 plus GST).
The village operator cannot be blamed if the individual has not taken the time to fully absorb the transaction they are entering. It has to be pointed out that there are over 2,000 villages across Australia, with 170,000 residents, with all having a DMF of some description. And 40% of the villages are operated by not for profit’s like the Catholics, the Salvation Army, the Anglicans etc. It works for most people and is the basis of making villages affordable.
The number of villages being taken over by large operators in recent years has actually not been that high. It is true that Lend Lease purchased the majority of the Prime Trust portfolio (which it already managed) but it has to be kept in mind that it was Lend Lease that kept these villages going as they were in receivership and since then have been investing in their infrastructure. In effect they saved the day because nobody else made a bid to buy the Prime Trust villages given their problems created by the previous owners.
Regarding Lend Lease as an operator generally, each village has its own dynamics – as demonstrated by your village having a residents committee that appears to be at times in conflict with its own members. My experience says you cant take a broad brush across all villages owned by one operator – you have to look at them individually. And Lend Lease has 80 villages. (This is the same as large not for profit operators as well, as I think you have experienced). Thanks to your comments here on Frank & Earnest the senior management is now aware of your views and hopefully they will respond.
Regarding your capital gain comments and the fact that departing residents will not receive the cash they put in when joining the village when they leave, this is in line with the village offer to new residents: enjoy the village resources now – like community facilities, management, security etc – and pay when you leave with the DMF. It has to be remembered that the operator makes no income from village residents until they leave the village, and that may be 25 years with no income!
The point of the article is that if you entered a village contract where you share the capital gain and the value of your village home is going up, then you will share in the increased value, meaning you will receive more money when you depart, making your stay in the village a lower cost. (There are virtually no not for profit operators that offer to share in the capital gain, meaning they take all the growth in value).
It is unfortunate that you feel that life is not so good in a village and no doubt you have some significant reasons for feeling this way, Perhaps a comparison can be made to the experience some people have when they move from their family home into an apartment building and face rules and body corporates. I can only reflect on the vast majority of the 250+ people I have met and interviewed in villages who in the main are pleased they made the move, with their village providing them a contentment that they did not have living in their family home.
Regards, Frank (AKA Chris)
Re thread on ‘Good times roll for retirement village residents’. Frank & Earnest Newsletter – Issue No1. 10 April 2015
Hello Frank (AKA Chris),
I appreciate that I am quite late in adding to the comments here. We were away when the first edition of your newsletter arrived and returned only last week so have been doing a catch up reading.
Firstly, may I comment that the idea of the Newsletter is a great one and one of the few places where residents of retirement villages are able to put forth their views based on their experiences in their retirement village.
When it comes to retirement villages – one size most definitely does not suit all and there are many aspects that are different in each village. It is, therefore, most important that persons thinking about going to live in a retirement village do their homework thoroughly. Although, even this won’t save them – only the experience of living in a village will over time.
While agreeing with yourself that the village operator cannot be blamed if people do not take the time to fully absorb (understand) the contract they are entering into, let me add that, even with the help of a Solicitor who does understand the agreement (contract), it will never be fully understood until, as Joanne Wheeler pointed out, at least a couple of years have passed.
By then, the rose coloured glasses will be truly tinted for many people. When it comes to Scheme Operator’s surveys, many older residents only ever tick the boxes they think are the ‘right’ answers in case the manager knows which resident filled in the form. I know these surveys can be anonymous but I also know of many who do fill in what they think the operators want to read. I feel it a little unfair to state that the 94% who answered the question of “how happy are you since moving into your retirement village’ included answers of “fairly happy”. Fairly happy is certainly not the same as “Exceedingly Happy”! Therefore I would have to say that 94% of truly ‘happy’ residents is quite inaccurate. It’s easy to fudge figures on surveys depending on how the questions are worded.
Joanne is quite correct when she states that the Deferred Management Fee is a trap – in that when one realizes that it was a big mistake to enter a retirement village, unless you have a large bank account, you are indeed ‘trapped’ into staying in the village because of the fees entailed in getting out i.e. DMF, cost of sale (we live in a freehold village), refurbishment (which should legally be reinstatement, but try getting away with that.)
Of course the Operator is entitled to an income for the facilities he provided over the years but I would argue the point that it would be as long as 25 years without an income. In fact many villages are now putting up the entry age (residents will die off quicker) and charging the higher DMF in the first few years to make sure they get their profit back sooner. This adds to the ‘trap’ if you want out within even the first 5 years. Unfortunately there are many, many residents in many villages who, like Joanne, are asking why they ever moved into a retirement village.
We have the unfortunate experience of living in a Freehold village, which at the time seemed to be a better option than leasehold because we would actually own our own Unit. Now we have to deal with a Body Corporate committee as well as a Residents committee and can concur with Joanne’s statement about a group of residents vying for power and trying to dominate others. The worst thing is that the committees have no idea of either the Body Corporate & Community Management Act, or the Retirement Villages Act. They do not care about them, and do whatever they want, with, it seems, the approval of the Operator and the Village Manager who allow them to breach the Retirement Villages Act with impunity.
Yes, retirement villages will suit some people, but I feel that the ‘contentment’ of many is mainly created by their ignorance early in their tenure. Interesting to see how they feel after 5 plus years, especially when their bank account has taken a hammering with the annual budgets and they add up the costs of moving out – and find they are stuck in the village until they go out in a box.
Sorry Frank – I’m with Joanne on this one.
Regards,
Barbara Irving
P.S. A well run village where residents are truly happy in their environment would be one where the residents are treated with dignity, respect, honesty and transparency in all aspects, especially financial ones, by the Scheme Operator and the Village Manager. Where residents committees and management were made to conform to the Retirement Villages Act and management put a stop to those residents who bully and try to intimidate others. The retirement village industry would flourish, residents would be happy to recommend their village and the Operators profit would increase. A win, win situation.
Hi Joanne,
And thanks for your lengthy reply to my article.
Responding to your points, you mention the research conducted by villages.com.au (which I am the publisher) and that the research only covered residents that had joined a village in the past two years.
This is not correct. In the 2013 research program we surveyed 5200 residents across more than 200 villages nationally. 1050 of them had moved in the past 24 months – the other 4150 had moved up to 25 years before.
Equally in 2011 we surveyed another 10,600 residents in different villages to 2013, again with a small percentage who had moved in the past 24 months.
These surveys were totally random and in most cases captured close to 100% of all village residents. they covered both large and small private operators and not for profit operators.
The consistent results across 2011 and 2013 was a ‘satisfaction’ result exceeding 94%. This was measured by the question “How happy are you since moving into your retirement village”, with 94% saying ‘Fairily happy’ to ‘Exceedingly happy’.
Regarding the Deferred Management Fee creating a trap, it is a fact that there is a cost to living in a village and that cost is paid when you leave. This is clearly explained in the information provided to potential residents but many do not take the time to fully understand what they are being told. We agree that the contracts are also confusing and join with the ARQRV in QLD advising people to get legal advice to fully explain the contracts before signing. (I have an interest in Villages Legal Services which does just this for a flat rate of $1000 plus GST).
The village operator cannot be blamed if the individual has not taken the time to fully absorb the transaction they are entering. It has to be pointed out that there are over 2,000 villages across Australia, with 170,000 residents, with all having a DMF of some description. And 40% of the villages are operated by not for profit’s like the Catholics, the Salvation Army, the Anglicans etc. It works for most people and is the basis of making villages affordable.
The number of villages being taken over by large operators in recent years has actually not been that high. It is true that Lend Lease purchased the majority of the Prime Trust portfolio (which it already managed) but it has to be kept in mind that it was Lend Lease that kept these villages going as they were in receivership and since then have been investing in their infrastructure. In effect they saved the day because nobody else made a bid to buy the Prime Trust villages given their problems created by the previous owners.
Regarding Lend Lease as an operator generally, each village has its own dynamics – as demonstrated by your village having a residents committee that appears to be at times in conflict with its own members. My experience says you cant take a broad brush across all villages owned by one operator – you have to look at them individually. And Lend Lease has 80 villages. (This is the same as large not for profit operators as well, as I think you have experienced). Thanks to your comments here on Frank & Earnest the senior management is now aware of your views and hopefully they will respond.
Regarding your capital gain comments and the fact that departing residents will not receive the cash they put in when joining the village when they leave, this is in line with the village offer to new residents: enjoy the village resources now – like community facilities, management, security etc – and pay when you leave with the DMF. It has to be remembered that the operator makes no income from village residents until they leave the village, and that may be 25 years with no income!
The point of the article is that if you entered a village contract where you share the capital gain and the value of your village home is going up, then you will share in the increased value, meaning you will receive more money when you depart, making your stay in the village a lower cost. (There are virtually no not for profit operators that offer to share in the capital gain, meaning they take all the growth in value).
It is unfortunate that you feel that life is not so good in a village and no doubt you have some significant reasons for feeling this way, Perhaps a comparison can be made to the experience some people have when they move from their family home into an apartment building and face rules and body corporates. I can only reflect on the vast majority of the 250+ people I have met and interviewed in villages who in the main are pleased they made the move, with their village providing them a contentment that they did not have living in their family home.
Regards, Frank (AKA Chris)
In south africa the retirement village is a like a community where people all socialise together and most participate in the joint activities . They support each other and its like a large extended family.
I visited a lot of retirement villages in western australia – the communal facilities only had a scattering of people , if any around .
From the People i interviewed there – I discovered that most residents would spend their time out of the community visiting people out if the village like old friends/ family or travelling – otherwise isolating themselves in their homes. As a result all their-fed back related to the fact it was secure , help was around when needed. But no-one was particularly content or enthused
Whereas the south Africans were far more enthused about the new friends they have made – new group hobbies, the friendliness’ and social interaction , then the advantages if security and access to medical facilities .
Keeping in mind how unsafe south africa is i was amazed socialising still rated top of their needs .
Personally, i think they have created the perfect ageing environment –