Australian Property News

Retirement villages offer gains

Posted on Friday, September 03 2010 at 10:39 AM

Retirement housing is being overlooked as a property investment strategy, according to property educator Jennie Brown.

With more than two million Australians now aged over 70, Brown says that by 2050 seniors are likely to represent almost a third of the population.

“The aging baby boomer segment of our population has seen not only a massive shift in thinking, it has bought with it a change in opportunities for real estate investors,” she said.

Brown said investment in retirement housing as a wealth strategy was overlooked by many people but was nevertheless lucrative.

“Organisations like the church, the government and other community-based or focused groups used to run retirement homes as a service to the population,” she said.

“However, these days the government has changed direction and encouraged the private sector to become involved.”

Brown said a retirement village was a good long-term investment because it was generally owned by a trust, which then on-sold individual houses, villas or units to retirees.

“When the retiree passes on or moves away, their house, villa or unit becomes the property of the retirement village once again, with the resident (or their estate) receiving a small amount of their initial investment back,” she said.

“But during the time they live there, they pay a maintenance fee for the grounds and the building. As you can see, this is a really good deal for the people who own retirement villages.”

Brown said another incentive was depreciation benefits, as the furnished community complex’s depreciation was passed onto the unit’s owners.

“What’s more, retirement villages get to increase their rents twice a year in accordance with the biannual increase in government pensions, so with retirement villages the net yield you can expect will be high.”

However, Brown said disadvantages could include difficulty in gaining finance and difficulty in on-selling.