What happens to retirement villages when the property market changes?Posted to Retirement Section on 04-12-2017
Larger retirement village corporates may be better placed to deal with a flattening or downturn in the property market, leaving smaller villages more at risk, a CFFC-led forum found.
Residents aiming to access the money they’ve put in may find it more of a challenge as a result.
“The retirement village market is not immune from a slower property market,” says CFFC’s National Manager for Retirement Villages Troy Churton. “Intending residents and residents need to get clear advice so they understand how soon they can get access to their capital if they sell.”
Because property is cyclical, there can be periods of declining listings, sales, lower values, pressures to sell that lead to transactions such as conditional sales that can fall over. This situation raises issues for retirement village residents, operators, supervisors and banks.
In most village occupation right agreements, the resale timings affect residents’ access to their money, and this can have implications for their future plans. Delays can be costly. Most residents will not get access to their capital until the unit they occupied has been re-licenced to a new resident.
“This is especially relevant if you need to transition into full time care or if your estate needs that capital for other reasons,” explains Churton. “It’s a good idea for residents’ families and those with powers of attorney to be aware of the situation and be ready for it.”
Some people think the law should require operators to repay the resident’s capital, less any fixed deductions and other charges, at the same time the resident vacates their unit. For some retirement village operators, if they were required to do this, they would need deep pockets to recapitalise and manage their business cashflows.
If this change to the law was made, it would likely favour larger corporations running villages. A possible long-term trend may see less smaller villages able to offer this option and exit the industry, leaving less choice for residents.
Close to 80 representatives from every sector of the industry, including operators, developers, retirement village managers, statutory supervisors, government representatives and residents attended the annual stakeholder forum hosted by CFFC on 21 November.
The annual forum is an opportunity for diverse groups to share information and discuss topical issues in the retirement village industry.