RETIREMENT VILLAGE INDUSTRY
Recently, Alan Kohler, the ABC News Finance presenter, has weighed in on the retirement village industry debate.
He says “The Retirement Village industry is a booming national disgrace, with three very juicy rackets: deferred fees, ongoing fees that keep going when you die, etc…”.
Mary Wood, the Executive Director of the Retirement Living Council at the Property Council of Australia (formerly the RVA) has responded. She says “…some of Alan Kohler’s latest criticism of the retirement village industry is unfair and ill-informed”.
So, who’s right? Is there a middle ground? Do articles such as Alan Kohler’s help? Do Mary Wood’s references to national survey results give prospective resident’s an accurate picture?
Essentially, Alan Kohler claims the retirement village industry is a rort. He raises some of the very points we raise on our website. Alan Kohler’s comments certainly won’t help current resident’s trying to sell their retirement village unit. They will, however, focus future buyer’s attention on some of the many pitfalls within the retirement village industry.
Mary Wood, of the Retirement Living Council, cites the following statistics.
98% of recent village residents would still make the same decision to move into a village, if they had their time again.
Residents had higher rates of happiness and wellbeing than when they lived in their family home.
Source McCrindle Baynes National Village Census.
Let’s take a closer look at those statistics.
The executive summary of the McCrindle Baynes Villages Census Report 2013 states the following.
98% of people who have moved into a village in the last 23 months stated they would make the same decision to move into a village if they were given the decision over again.
From our experience of talking to village residents, it often takes them months, or even years, to really understand their retirement village contract. Usually this happens AFTER they sign their contract. Many don’t understand their contract until they leave the village to move into higher level care. I would like to see this question asked of those residents who had left a village and moved onto higher level care. I suspect the result would be very different.
The McCrindle Baynes Villages Census Report from 2011 had another very interesting statistic. When asked “Will you pay a Deferred Management Fee (DMF) when you leave the village”, the surveyed residents replied as follows.
So, 24% of surveyed retirement village residents didn’t know whether they had to pay a deferred management fee. That’s current retirement village residents, living in a retirement village!
Not only that, 19% of surveyed residents thought they didn’t have to pay a DMF – which, given the retirement village industry models currently available, is highly unlikely!
In fact, we can read elsewhere in the report that:
39% of recent purchasers regarded the deferred management fee (DMF) as an unreasonable fee
37% accept it is a reasonable fee
13% state they do not understand it
This lead the McCrindle Baynes Report to conclude the following.
This clearly identifies that new residents are still not achieving a clear understanding of the contracts they enter when joining a village – with the consequence that conflict and increased regulation is likely with the increase in consumer advocacy from the upcoming Baby Boomer generation.
Source McCrindle Baynes Villages Census Report Executive Summary 2013
So, if Alan Kohler can bring focus to the retirement village industry, and get potential retirees to do the necessary research before making this move, that’s a great outcome!
But there is a happier story here as well.
As Mary Wood points out, residents had high rates of happiness and wellbeing.
When surveyed, residents stated that their overall happiness and life satisfaction had changed as follows.
30% stated it had increased significantly since moving into the village
29% stated it had increased slightly
35% stated it had stayed about the same
7% stated it had decreased slightly or significantly since moving into the village
When you consider that most village residents are 75 or older, that’s an impressive statistic. As Christopher Baynes comments “what other industry or sector or service can claim to actually increase the happiness and life satisfaction for customers who are 75 years or older, with both the health and financial challenges that most face?”.
So, what can we learn from the two extremes of this argument.
On the one hand, Alan Kohler is right. Residents clearly don’t understand the contracts they are signing and these contracts have significant financial consequences.
On the other hand, they’re buying a lifestyle. Essentially, they’re buying happiness and life satisfaction. Is there anything better to spend your money on when you’re 75?
Given the consumer is buying a lifestyle, the question is, how much are they prepared to pay for it? They know they want what’s for sale, but they don’t know how much it will cost them. So, given they don’t understand the full price, how do they determine whether it’s worth it?
As we’ve already read, 39% of recent purchasers regarded the deferred management fee (DMF) as an unreasonable fee. And yet, they’ve agreed to pay it.
That’s where The RetireEase System comes in. This system is designed to step potential purchasers through the process of buying a retirement village home. It helps them identify:
- Whether retirement village living is for them
- What the contract types are and the rights and responsibilities of each
- What the fees and charges are
- How to undertake the necessary research and due diligence required before signing contracts
If you haven’t already done so, watch our free video How To Get The Best Possible Deal On A Home In A Retirement Village.
The information provided could save you thousands of dollars when purchasing a retirement village home. However, perhaps more importantly, it will stop you making the single biggest mistake, made by up to 80% of retirement village home buyers, that costs them thousands.
Click here to watch the free video.
So, Alan Kohler is right. There are some significant concerns with the current models available within the retirement village industry. Yet, so is Mary Wood. Most retirement village residents enjoy increased overall happiness and life satisfaction.
We believe there IS a middle ground. There is certainly a right way and a wrong way to buy a retirement village home. Find out how here.
