Retirement villages are multi-residential housing communities that offer over-55s an affordable, secure, and supportive way to live out retirement. They are generally designed for older adults who can take care of themselves, although many villages provide home care facilities.
They are commonly based on a loan and license agreement, where you pay an entry fee (essentially an up-front, interest-free loan) and are then liable for ongoing fees for services that are offered by the provider. They are popular among semi-retired and retired people looking for a low-cost and community-centric way to live.
Retirement villages are structured differently from aged care and land lease communities. Read on to learn more about retirement villages and explore how they might work for you.
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A retirement village is a community offering retired (or semi-retired) residents a range of services, facilities and accommodation options – from units and serviced apartments, to villas and houses of different sizes and heights.
Entry to retirement villages is generally restricted to people who are over 55 years of age and have retired from full-time employment (many still work part-time or casually) and their spouses (who don’t have to be over 55). Residents are healthy and active enough to be able to live independently in their own homes.
Most – but not all – retirement villages allow you to bring a small pet with you. Typically it’s the newer retirement villages that are more likely to allow residents to keep pets, although it will normally require the approval of the manager and the following of guidelines (relating to noise and disruption etc). Older retirement villages are usually not as lenient regarding pets unless it’s an assistance dog.
Retirement villages offer purpose-built, low-maintenance homes, which eases pressure on seniors who no longer feel they can keep up with their home and garden upkeep.
If you find you need more day-to-day assistance, most retirement villages will offer personal care to help with tasks such as cooking, cleaning, laundry, bathing and dressing. While these services can make your life easier and allow you to live in your home for longer, they will usually come at an additional cost.
Safety and security
Good retirement villages offer both health and physical security. Retirement village homes typically have additional railings in the bathroom, wider doorways for wheelchairs, emergency buttons, carpet instead of wood floorboards (to prevent slips) and a lack of stairs. There’s usually quick-and-easy access to help in a health emergency, such as a fall or accident. Many retirement communities have medically-trained staff, such as aged care providers and health professionals, on call at any time, leading to fewer and shorter hospital visits. Many retirement communities are also protected with gates and security guards (at night).
Retirement villages are usually within easy proximity of transport and local amenities, such as shops, churches, GPs and hospitals.
Retirement villages often have a vast range of communal facilities, such as a swimming pool and spa, tennis court, bowling green, gym, cinema room, library, dining area, cafe, bar, and veggie patch. These are available to residents at no extra cost and are typically maintained by the operator, contractors and volunteer residents.
Retirement villages typically have their own schedule of group activities, such as yoga classes, aqua aerobics, cycling, arts and crafts workshops, bingo/card nights, shopping trips, and other external excursions that take place weekly or monthly.
You can typically be involved with the community as much or as little as you wish, but many join retirement villages out of a desire for greater social contact, and socialising with like-minded people is at the heart of village life. Australian researcher McCrindle Baynes found an overwhelming majority of people who move into a retirement village are happy with their community.
Contracts: While most retirement village contracts are fair, some are complex. It’s best to go over them with a fine-tooth comb and with the assistance of a lawyer, so you know which one is right for you.
Retirement villages are primarily self-care in that residents are independent and choose to make the move into one when over 55. Aged care facilities, however, require the potential resident to have a government-appointed assessment by an Aged Care Assessment Team (ACAT) before they are admitted.
Aged care involves a higher level of personal and/or nursing care for the residents’ health and safety, including round-the-clock supervision and assistance. It comes under federal government legislation and regulation, whereas retirement villages are governed by the rules and regulations in each state/territory. In aged care, the accommodation and care charges may be government subsidised.
The three most common tenure arrangements for retirement villages are Loan & Licence Agreements, Leasehold, and Freehold/Strata title.
Loan & licence agreements account for approximately 60 per cent of all retirement villages arrangements. Under these popular agreements, people pay an entry fee/ingoing contribution (basically an upfront, interest-free loan) and are generally also liable for ongoing fees for services offered by the provider, and an exit/deferred management fee upon departure. The exit fee varies across providers, however, a common approach is a percentage of the purchase price for each year of residence. This may be capped at a maximum number of years (usually 10 to 12 years). Some providers may also take a percentage of any capital gain as part of the exit fee.
The term of the licences under these agreements is usually for the life of the occupant or licensee. Upon the passing or vacation of the accommodation by the licensee, they will generally be entitled to the ongoing contribution they paid, as well as any ongoing and exit fees they owe.
A leasehold arrangement is the second-most popular tenure type for retirement villages (about 30 per cent of all retirement village arrangements are leasehold). A high level of security is provided to the resident, as the lease of the unit is generally registered on the village’s title. The resident has an exclusive right to reside in the accommodation under the contract, which includes a lease to the resident from the operator.
In leasehold arrangements, the resident pays an ingoing contribution (basically an interest-free loan), to the operator for the right to reside. Residents also need to pay ongoing fees for services offered by the provider.
Under leasehold arrangements, the residents’ sign leases in respect to their individual units, and the provider owns the entirety of the facility. Usually, these leases have a period of 99 years, and may be sold or ‘assigned’ several times to different residents over the years. It’s important the resident understands that usually, they are not purchasing real property within a retirement village, but rather the right to reside in the property (under the lease agreement).
Upon selling or ‘assigning’ the lease, the resident (or their estate) will usually be entitled to the purchase price paid by the new resident or ‘assignee’ less any fees owing and an exit fee, which may be made up of a number of components and which will generally increase for each year since the resident signed the lease. In addition to the exit fees, the resident may also need to pay the village a share of the capital gain upon the sale.
About 10 per cent of retirement village units are owned on a strata title basis. With strata title, residents purchase a freehold title to the unit, but ownership only extends to the space within the accommodation itself and not to the land or structures built on it. The latter are common property, which is owned by a body corporate or association owned by the unit owners.
Two entities may be involved in the management of a strata title village: the strata manager appointed by the body corporate to manage the common property and provide certain property-related services, and another manager who provides retirement-related services, such as emergency response and transport services.
Many – but not all – retirement villages charge an entry fee, and this cost can be referred to as an entry payment, a purchase price, a lease premium or an ‘ingoing’ contribution. Entry fees can range from as little as $100,000 to more than $2 million, depending on the village’s location, age and facilities. According to the Property Council’s 2020 Retirement Census, the average entry fee for a two-bedroom unit in Australia is $463,000.
Ongoing service charges (aka the service fee, general services charge, recurrent charges or weekly/monthly fees) cover shared facilities and services such as maintenance and upgrades of facilities, grounds upkeep, village staff wages and communal area insurance. They are charged by all villages, regardless of title type.
Typically, operators are not allowed to make a profit on ongoing service charges. According to the Property Council’s 2020 Retirement Census, the average service charge for a two-bedroom unit was $518 a month. There was a small but significant difference shown between the monthly for-profit operator average ($526) and not-for-profit operators ($485).
These are called many different names, including exit fee, departure fee, deferred management fee (DMF), retention amount or outgoing payment. As the name suggests, this is the amount residents are liable to pay when they leave the retirement village (whether they choose to move elsewhere, need to move to an aged care facility, or pass away). Essentially, exit fees are the profit made by the operators of the village and go towards new projects, corporate overheads or shareholders.
Typically, exit fees are the biggest cost residents pay as a result of living in a retirement village. They are most often calculated as a percentage of the entry payment (or the resale or re-let price the new resident pays). The cost usually accrues annually, meaning that the longer a resident stays, the more they will pay, but there’s usually a cap to how much can be accrued. The contract might say something like “Exit fees are set at 9 per cent in the first year, then 3 per cent annually, capped at 30 per cent”.
According to the Property Council’s 2020 Retirement Census, a typical range is between 25-36 per cent. If a person moves into the national median-priced two-bedroom unit of $460,000 and stays in the village for six or more years, the exit fees average about $130,000 (or 30 per cent of your incoming contribution).
For the purposes of Rent Assistance, the government considers retirement village services charges to be rent. To be eligible for Rent Assistance, your services charges as a single person need to be at least $124.60 per fortnight (or $201.80 for a couple). Rent Assistance payments operate on a sliding scale. For every dollar you pay in rent above $124.60 (or $201.80), you’ll receive 75c in assistance, but there are maximum limits. For a single person, the maximum Rent Assistance you can receive (no matter how high your service charges are) is $139.60 per fortnight.
Moving to a retirement village is a major financial investment. There are entry capital and recurring payments, ongoing fees, exit fees and other payments. Some retirement village fee structures are complicated, but it’s important that you understand them before diving in (legal assistance is recommended here). If things don’t work out, extremely high exit fees can leave you without enough money to seek alternative or more suitable accommodation.
Some retirement villages may not allow pets, or won’t allow certain pets (such as noisy birds and large dogs), so it’s important to check this if you want to bring yours.
Retirement villages are designed for people who are healthy and active enough to be able to live independently, so if you develop medical needs that require a higher level of care, you may need to move into an aged care facility.
Age and proximity of residents
Not everyone likes (or is used to) living so close to other people. And not everyone perceives it to be appealing to live in a community of people who are so homogenous age-wise.
Distance and downsizing
If you move from a family home in the country to a retirement village in the city, it may be harder for friends and family members to visit you as frequently as before. You may also miss having a large yard/property.
How many retirement villages are there in Australia?
There are about 2,500 retirement villages in Australia. Almost 200,000 seniors call a retirement village home, nationwide.
Which are the biggest developers of retirement villages in Australia?
LendLease, Stockland, Oak Tree, The Village, and UnitingCare are five of the larger developers.
Can I tour a retirement village?
Yes. Many allow you to book personalised, private tours that show you the different accommodation options, facilities and activities available. Some now offer the option of a virtual tour too.
Are guests/visitors allowed in retirement villages?
Guests/visitors - such as family and friends - are welcome to stay with you for short periods. Extended stays may need to be approved by the retirement village manager, but it’s not possible for guests to reside permanently at your home.