It is important to assess the full impact on your finances before moving in to a retirement village.Credit:Tanya Lake
Tony Massaro,partner at PWC,says the census shows that the onset of the COVID-19 pandemic highlighted the value of retirement villages. He points to four key sets of data from the census:
- The number of people moving into retirement villages is growing,with 90 per cent occupancy – up from a 2020 occupancy rate of 87 per cent.
- Homes in retirement villages are selling faster,with the time from vacation to settlement dropping from 261 days to 223 days.
- Development supply is increasing,with 10,500 new homes to be built over the next thee years.
- Affordability is increasing,with the average two-bedroom home in a village being 55 per cent of the median house price in the same postcode,down from 67 per cent.
While PWC calls it “affordability”,I think the better term would be “price”. Whether that price is affordable to a senior depends on a host of other factors,including the potential impact on an age pension.
For example,if you are a single person with $150,000 in financial assets,and you downsize from a $1 million home into a retirement village for $550,000,that adds $450,000 into your assessable assets for age pension purposes and takes your pension from $25,678 a year to zero.
The other element of retirement village prices is the exit fee. As a general rule,the less you pay upfront the more you pay at the end.
The census showed 55 per cent of retirement village contracts have an exit fee based on the purchase price,with the resident receiving no capital gain or loss when the property is sold.
Almost one-third have an exit fee based on the sale price,with any capital gain or loss being shared between the resident and the village operator.
For the vast majority of contracts,the exit fee was 36 per cent or less,with most (72 per cent) fees accruing over six years.