The retirement development pool is warm – jump in?

The retirement development pool is warm – jump in?


August 2018
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The retirement development pool is warm –  jump in?

In late November of 2017 the results of the annual PwC and Property Council Retirement Census were published to much concern - “Retirement villages approaching capacity – where will our seniors live?” – read the headline.

For the future retiree, this news may have caused some unease; for the astute property developer, however, this report revealed an opportunity.

The results of the census showed an increasing number of older Australians choosing to live in a retirement village. The benefits of which appeal broadly, as hopeful residents look forward to taking advantage of hotel-style services, visiting health professionals and enjoying the residual cash from downsizing from their family home.

Population of the over 65 bracket is also set to grow by 5 million over the next 40 years.

Ben Myers, Executive Director – Retirement Living at the Property Council of Australia, has said that we are facing an “imminent capacity crisis”, calling on state governments to act quickly to encourage new retirement developments.

“Nearly 200,000 senior Australians have made the informed choice to choose retirement village living, and this number is set to grow sharply in the coming decade,” Mr Myers said.

“Research shows retirement villages extend people’s ability to live independently within a secure community and, on average, access more than $200,000 in capital from the sale of their home to use how they wish.

“It is clear however that without significant improvements in state planning policy, many seniors won’t be able to access these benefits in coming years.”
 

Who will build them?

As we discussed in this recent article, 2018 has seen a number of developers achieving council approval for the construction of new retirement villages and aged-care facilities – but the demand still appears to outshine the future supply.

New Zealand's Ryman Healthcare have recently gained development approval for a retirement village and aged-care centre in Burwood East, Melbourne, marking the beginning of their third such facility.

Australian Retirement Property Group, Aveo, has also recently gained planning approval this year for multiple new aged care facilities; including Labrador on the Gold Coast, Croydon in Melbourne and Palmview on the Sunshine Coast.

There are also some incredible development approved sites currently on the market too – for instance, this opportunity in Parkwood on the Gold Coast.
 

New retirement village concepts

Stockland is also one of Australia’s largest property developer for both residential communities and retirement villages. Earlier this year they announced plans to launch a new retirement living concept known as ‘Aspire’; the key selling points are that there is “no exit fee” and residents receive “all capital gain”.

The idea behind the Aspire model is to offer a retirement community feel that sits outside of the retirement village legislation. The development will operate as a standard residential development. Buyers will own their home on a strata or community title basis, and an owner’s corporation will be responsible for the ongoing maintenance and management.

The communities will be made up of low-maintenance two and three-bedroom houses and each residence is required to have at least one occupant who is at least 55 years old.

Many communities will be fitted out with village style amenities; a clubhouse, heated pool, gym and bar etc.

This situation may appeal to some, but there are some downsides worth investigating. If for instance a couple aged 60 and 50 years old respectively move in to a home within this ‘residential/retirement community’, and the elder partner then passes away – will the younger be required to move out?
 

The future of the sector

Exploring why alternative investment sectors have become increasingly popular in Australia, JLL marked out SWOT analyses of various alternative real estate developments, including retirement and aged care, in their recent Alternative Investments report.

Discussing their first ‘Mega-Trend’, Australia’s ageing population, JLL were able to identify some clear strengths and opportunities within the retirement and aged care accommodation; more consumer choice, more flexibility in contracts and consolidation across the sector being paramount.

While potential changes to state regulations of retirement villages leave room for some uncertainty, the more immediate threat may come from fluctuations in the residential housing market.

Macquarie Research Analyst, Matt Johnson, commented on Aveo stock prices stating it is "difficult to see how they (Aveo) are immune to a softening residential property market".

He cited residential headwinds in such limited mortgage relief, slower credit growth and falling auction clearances and volumes which would put pressure on housing growth. 

"This likely means less retirees transitioning from home ownership to village retirement."
 

If the pool is warm, jump in?

The advice remains the same for every area of property development experiencing a growth trend. Do your homework.

There are many exciting opportunities that have been exposing themselves over the past 12-months especially. With any undertaking it is important to gain a wide perspective. An aging population that wants to retain its independence awaits developers who are able to meet its demands.

 

*NOTE: This article is not a definitive assessment as to the overall state of the market, but should serve as a guide to highlight how respective sectors of the property market are dealing with change.

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