John Collyns believes retirement villages play an important role in meeting the needs of New Zealand’s ageing population.
John Collyns, Executive Director, Retirement Villages Association (RVA)
The growth in demand for retirement village living has been nothing short of spectacular. And as the population ages and more people discover the benefits of village life, we expect that growth to continue. Figures put out by valuers Jones Lang LaSalle show that 75 existing villages have around 5,000 units at some stage of the consent or construction phase, plus an additional 51 villages with around 6,500 units are planned. The number of units is expected to grow by almost 12,000 over the next three to five years, an increase of around 50 per cent on the existing stock.
It’s been suggested that this growth isn’t sustainable, but look at the demand curve.
At the end of 2014 around 12 per cent of the over-75 population chose to live in a village; this is an increase from 10.5 per cent at the end of 2013 and up from 9 per cent at the end of 2012. Not only is the number of over 75-year-olds in the population increasing, so too is the number choosing to live in a retirement village. Assuming that we maintain (rather than increase) a 12 per cent penetration rate, we will need to build an additional 45,600 units over the next 20 years, generated solely by the ageing population. Obviously, if we continue to increase the penetration rate (think of it as market share), that number will also grow – an increase to 14 per cent of the 75+ population will also increase demand for units to 53,200 by 2038.
Or to put that another way, at an average village size of 150 units, that’s a demand for 17 new villages each and every year between now and 2038.
This demand for units is driving operators’ construction programmes. Industry valuers CBRE estimate that 2,150 village units were completed in the 2014 calendar year – that’s 41 units and apartments each and every week! And it’s not just the corporate operators who are busy building; a bit under half of last year’s total was provided by private independent operators and approximately 10 per cent were built by not-for-profit operators such as the Masonic Trusts, church and religious groups. Remember, each unit built frees up a family home back into the housing market, and contributes to easing the general housing shortage we face.
The principal challenges for the sector revolve around managing that success – finding suitable land in the right place and at the right price, ensuring the consent process is efficient and effective, and finding the right people to manage and run the villages. The RVA is working with local government on their strategic planning processes and with central government on amendments to the RMA that will see retirement villages as a residential development and ease the way to establish them so they are part of their residents’ natural community. As the majority of residents move to villages that are no more than 15 kilometres from their homes, it’s essential that villages are part of those communities.
The enthusiastic response from existing residents when asked about their decision to move to a village also drives that growth. Late in 2014 the RVA commissioned leading Australian market research company McCrindle Research to find out more about our residents’ attitudes to, and expectations of, their move to a village. Around 1,300 randomly selected residents (from a sample of 3,000) completed the survey. The results were outstanding. Replying to the international standard Net Promoter Score customer satisfaction question, “How likely is it that you would recommend living in a retirement village to your friends and family?”, we scored +47, which is one of the highest customer satisfaction scores recorded by an industry sector. By comparison, doctors scored -13, energy companies -40 and banks +13.
The same survey found that two out of three residents reported a greater sense of security; 67 per cent reported an improved social life, and a third reported an improvement in their physical health. It’s hardly surprising that our residents tell anyone who’ll listen that “I should have done this years ago!”
While on the subject of health, a major factor in people’s decisions to move to a village is the proximity of care, should it be needed. A village that provides a continuum of care often does away with another move later.
Another reason to think about moving is a very practical one. Often the family home represents the principal asset, but being asset-rich and cash-poor means that many older people struggle with a lack of money. Selling the home to another family to enjoy not only adds another house to our nation’s housing pool but it also releases the pent-up equity, allowing the resident to buy an occupation right in a retirement village and have money left over to add to their retirement savings.
Social researchers CRESA recently surveyed 477 retirement village residents about the equity release they experienced when they moved to a village. Around 30 per cent said they received less than $25,000 but almost 35 per cent said they received more than $100,000 (everyone else was somewhere in between). In general, retirement village occupation rights are priced at around 60–75 per cent of the average freehold home in the area where they’re built so that incoming residents can get some equity to add to their savings. Because (in general) they don’t actually own the bricks and mortar, it’s cheaper than a freehold home and the hassles of home ownership are done away with – the constant cycle of painting, weeding, kitchen and bathroom upgrades, repairs and maintenance.
Retirement villages are not just for the wealthy. Residents come from all walks of life, with a majority (61 per cent) using their national superannuation as their primary source of income. 55 percent state their incomes are $25,000 p.a. or less. Just seven per cent state their current asset value is greater than $600,000. Many villages are affordable for the everyday New Zealander. Across the industry there are entry points as low as $80,000 and as high as $1.2 million. Without the retirement village model operating as it does, many people would be unable to access the level of care, security, facilities and living arrangements that are on offer.
And retirement village units are purpose-built for older people – warm, accessible, and energy efficient to run; just what many are looking for after a long time in a home that’s too big, too cold and too expensive to maintain.
From the RVA’s perspective, the challenges we face are crucial not only for the sector, but also the wider community. Retirement villages are now part of the mainstream housing options for older people, and the thousands of people who are flocking to the public seminars about living in a retirement village being run around the country by the Commission for Financial Capability are proof of that. While village living is not for everyone, it will continue to play an important role in meeting the needs of New Zealand’s ageing population.
We are fortunate that our consumer protection regime is world-leading, and our villages satisfy residents’ needs. We are convinced we are part of the solution.