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Retirement village valuations.

Recently Edmonds Associate Valuers has assisted residents in retirement villages in Sydney in their dealing with Village Operators. Our valuation reports have assisted residents with negotiating their exit settlements as well as compensation for relocations within the village.

Valuing separate lots within a retirement village can be more complex than valuing traditional residential property.

The ownership structures in a retirement village vary from village to village and can be in the form of a Strata Title, Leasehold or under License. Under a Leasehold or License tenure a resident in a retirement village pays a “entry contribution” to the village which allows them to occupy a property.

There is no standard or single formula for setting entry contributions for retirement villages. Most retirees rely on the sale of their family home to fund the move to a retirement village. Today the sale of the family home is still the main source of finance used by residents to purchase their retirement unit.

Consequently, benchmarking against median house prices within a village’s catchment area can establish broad price parameters. A recent (2016) survey by Price Waterhouse for The Property Council of Australia found that newer villages approach the suburb median while older village moved away from the median.

The ingoing contribution can vary considerably for villages in the same region depending on the following factors:

  • Age of The Village/unit.
  • Location and accessibility to medical services, retail, transport. and recreational amenities.
  • Size and design of accommodation.
  • Community facilities provided in The Village.
  • Tenure offered.
  • Reputation of the operator.
  • Terms of the management agreement, that is,  the structure of the departure fee and proportion of capital gain on termination of occupancy.

Jones Lang LaSalle (2009) found that the current prices of entry in the not-for-profit and the for-profit villages are comparable, after making allowance for the terms of their documentation, in contrast to historically where not-for-profit villages often received government grants to assist with construction. Increasingly the not-for-profit villages rely on the revenue derived from resales in existing villages and new retirement village developments to subsidise aged care facilities.

In the context of an ageing population, there has been a growth in the number of facilities offering ‘ageing in place’ services, in addition to the combination of retirement-village Independent Living Units (ILU’s), with hostel and nursing homes in the one village.

From the early 1980’s private enterprise retirement villages were developed and marketed using: –

  1. Leasehold title,
  2. Licences,
  3. Company title, or
  4. Strata title

Many of these involved a sharing of “resale” capital gains and losses in addition to departure fees.

In the last decade, larger for profit operators have entered the industry introducing new management agreements that have progressively increased departure fees, increased operators control and reduced or removed capital gains sharing for leasehold/license tenure.

With the ageing demographic forming a more dominant proportion of the population the retirement village sector is set to gain more momentum as many retirees see this as a sound alternative to home based care. The benefits of living in a retirement village are security, the companionship of likeminded people and associated recreational services, the maintenance of specifically designed aged care improvements and gardens by the village managers and the options of transition from independent living to assisted living within the same village.

Edmonds and Associates has considerable expertise in the valuation, management and development of retirement villages. Please do not hesitate to contact our office for more information.