Among the many challenges facing Australians in our new post-COVID world is a critical housing shortage. House prices and rental rates continue to climb, and several property developers have gone bust, exacerbating the crisis further. Caught up in all this housing havoc is the subject of retirement homes. How has the retirement home industry been affected by the events of recent years and are they a good investment?
That’s a complicated question, but one industry player believes retirement homes could be a key to easing the housing crisis. The left-field suggestion comes from the Retirement Living Council (RLC).
RLC executive director Daniel Gannon said retirement communities were vital to achieving the Housing Australia Future Fund (HAFF) target. The HAFF aims to “improve housing outcomes for Australians” through the delivery of new social and affordable homes across Australia.
That aim forms part of an overall target of 1.2 million new homes by 2029. “The prime minister’s … target is an admirably ambitious one,” Mr Gannon said. “But retirement communities can help achieve this lofty goal as Australia ages.”
Mr Gannon is pushing for Prime Minister Anthony Albanese to count retirement units towards the government’s HAFF targets. Retirement units are officially recognised as dwellings by the Australian Bureau of Statistics.
Sounds practical, but are retirement homes a good investment?
A November 2023 RLC report, Better Housing for Better Health, highlights the economic savings and health benefits of retirement villages. In releasing the report, Mr Gannon said: “Retirement villages across Australia are already saving the government a billion dollars a year by delaying residents’ entry into aged care.”
However, it must be noted that the RLC, part of the Property Council of Australia, represents the retirement home developers. Do retiree advocates agree with the RLC’s assessment?
Representing the other side of the equation, advocacy group National Seniors Australia (NSA) encourages a healthy dose of scepticism. In January, the NSA said investing in retirement housing was very much a case of “buyer beware”. It also discouraged the notion of retirement housing being an investment. Buyers (or their benefactors) will likely get less for their homes at tenure’s end than what they paid for them, it claims.
Just over year earlier, the NSA stated: “As a rule, we do not promote [retirement] villages as a suitable downsizing option.” The group acknowledged that retirement homes may provide a potentially comfortable lifestyle option, which is more suitable as people age. However, this potential was often unfulfilled because “the legislation has enabled practices … detrimental to the financial wellbeing of seniors”.
The NSA wants the federal government to enact nationally consistent and strengthened retirement village legislation. The current system, it says, is a mishmash of complex and inefficient state, territory, and local government laws.
So what should potential buyers do?
Before making any decisions, the NSA suggests an old chestnut: “Seek independent financial and legal advice.”
This, of course, will come at a cost, but the NSA puts that into perspective: “The cost of good legal advice may be thousands of dollars. Some solicitors do charge up to $5000, and older people often decide against getting this advice because of the cost. But not doing so also could come at a very dear cost, much more than the legal advice.”
Ultimately, retirement home living may be a good option for you. But it may come at a significant cost. Obtaining the right advice could be your best chance of avoiding a retirement home rip-off.
Have you looked at the option of retirement home living? What have you learnt? Let us know via the comments section below.
Also read: Retirement advice – how much are we willing to pay?
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