The report by University of Technology Sydney academic Lois Towart found that retirement village accommodation is generally more expensive than general residential, like high density apartment blocks, that are designed for and marketed to investors.
However, once the cost of services and amenities are factored in, retirement village living “represents a cost-effective way for a senior to access age-appropriate facilities and services compared to general residential in that locality”.
Further, the intangible social and lifestyle benefits of village living tip the scale further in retirement village living’s favour.
Using de-identified data from PricewaterhouseCoopers and a like-for-like study of a series of retirement villages and general residential in their locality, Ms Towart came to the conclusion that: “Retirement village living is neither cheaper nor more expensive than general residential, it is more appropriate.”
She explained: “The benefit of the facilities and services available in a retirement village exceeds the cost of accessing these if a senior were to choose to live in general residential.”
Meanwhile, village living provides the “intangible factors” of peace of mind as well as social benefits.
For example, a retiree could find it hard to access companionship while living in general residential if their locality was skewed more towards “transient” renters and investors. Additionally, should a retiree’s social events like bridge or crafts stop, the onus is on them to seek out alternative engagements.
Ms Towart contended that in a retirement village, these social issues aren’t as prevalent.
“At a personal level this security extends to keeping an eye on each other,” she added.
“There is anecdotal evidence where village managers and neighbours after noticing that someone has not appeared at their normal time, checks on them and is able to avert a medical situation.
“This kind of watching out for each other is not available in general residential except with personal and/or electronic monitoring.”
In some places it is cheaper
Noting that once exit fees are factored in, “it is not possible to generalise” about whether village living is cheaper or more expensive, Ms Towart said that in places like Sydney, village living often is cheaper due to a strong general residential market.
She detailed: “Retirement village living is cheaper where surrounding residential has been designed for and has features suitable for “downsizers”. General residential that is essentially a competing product did not feature a competitive price.
“Where general residential is designed for and/or marketed to investors and first home buyers it was cheaper than retirement village living. This is not necessarily appropriate for seniors to age in place as apartments are designed for people who would be absent during the day without many of the facilities found in retirement villages.”
The Property Council of Australia welcomes the report
The executive director of retirement living at the Property Council of Australia, Ben Myers said the report highlights the benefits of living in a community which has services and amenities “at a resident’s door”.
“If you live outside a retirement village and you access facilities and services like swimming pools, gymnasiums, libraries, GP clinics and social activities, this report shows you’re going to probably end up paying more than it costs to live in a retirement village,” Mr Myers said.
Additionally, the research pointed out that these services reduce the need for similar government-funded ones, something Mr Myers noted.
“Critics of retirement villages are quick to point out the cost of leaving a village, but this research shows the cost of living should be measured much more broadly than by just looking at exit costs.
“Retirement villages offer access to facilities and services that lead to improved health outcomes and greater social interaction than would be possible in a general residential setting.”
Is there more to it?
Ms Towart acknowledged that entering a village “should not be considered the same” as buying general residential as the return is calculated in terms of lifestyle and amenity factors, rather than dollars.
“On a purely financial basis, using the same inputs and assumptions as general residential retirement village living provides a lesser return.”
Speaking to NestEgg recently, senior policy officer at the Consumer Action Law Centre, Katherine Temple said it can be “difficult” for retirement village residents and their families to understand their rights as a result of the complexity of the contracts.
Given this complexity, she urged residents and their families to get legal advice prior to sealing the deal.
According to Ms Temple, the deferred management fee (usually a percentage of the sale price of the unit) will often leave former residents with not enough money to move somewhere else once the fee is taken out.
“If you're getting charged a 35 per cent deferred management fee after two or three years and you decide you want to leave, then you've lost 35 per cent of your purchase and then you don't have enough money to go somewhere else,” she said.
“A lot of the exit fees you will pay won’t be quantifiable when you move in and that’s a problem,” Ms Temple cautioned.