Are retirement homes good value?
In reality the resale value of retirement homes significantly underperform the rest of the housing market. The average retirement property is owned for seven to eight years, during which time property prices would be expected to increase substantially.
- The purchase price. One of the biggest downsides is cost. ...
- Service charges and ground rent. ...
- Resale value. ...
- Failure to accommodate your specific health needs. ...
- Exit fees. ...
- Not everyone's cup of tea.
- Location. Your ideal location may come down to cost, safety, conveniences, preferences and proximity to the people who matter most to you. ...
- Cost. ...
- Staff. ...
- Accommodations. ...
- Level of care needs for other residents.
Entry fees can range from as little as $100,000 to over $2 million, depending on the village's location, age and facilities. According to the Property Council's 2020 Retirement Census, the average entry fee, across Australia, for a two-bedroom unit is $463,000.
By their nature, retirement properties often end up being inherited by the families of those who owned them, but are unlikely to be suitable to be used by them. They are therefore left with the task of selling a home which may represent a significant portion of their inheritance.
The disadvantages of retirement communities include they aren't cheap, could be in a less than an optimal location, smaller living area, lack of diversity, cliques/gossip and restrictive/excessive rules. They can range from condo/apartment style facilities to gated communities with individual houses.
Senior housing is so cheap because of its small size, age and deed restrictions, and government subsidies. There's also a smaller demand, apart from the location factor that makes some retirement home prices more affordable.
Where a village faces insolvency, residents now have rights ahead of those who have security interests. Consequently, for example, residents cannot be evicted or denied any facilities they would normally be entitled to by a village's mortgagee where default occurs.
Over the last few years, the retirement housing market has been attracting some pretty substantial investment, with an ever-increasing number of retirees putting their money into these properties. These homes are purchases that'll provide lasting benefits for your next of kin.
Retirement villages are not good investments
Making friends, having meals provided and access to a range of services and facilities are naturally appealing and are well promoted in the glossy brochures - and some of the facilities do deliver all this and more, but it comes at a cost.
Is senior living a good investment?
Investing in senior housing also yields higher total income returns (6.61%) than both the property index (5.53%) and apartments (5.20%). All these numbers prove that a seniors housing investment is your best bet for making money in real estate for 2022!
About retirement mortgages
We are sometimes asked “Can I get a mortgage on a retirement property?”. The simple answer is yes. Although many of the mainstream banks and building societies do not offer retirement mortgages, or lending into retirement, there are specialist mortgage lenders that do.
