Jul 25, 2023

Could retirement villages be an affordable solution to the housing crisis?

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Retirement living units are 48% cheaper than the median house in the same postcode, according to the Property Council Retirement Census. [Source: Shutterstock]

As our housing affordability crisis continues, new research has identified an affordable option for older Australians: retirement villages. 

Key points:

  • The 2022 PwC/Property Council Retirement Census found the average cost of a two-bedroom Independent Living Unit (ILU) in a retirement village grew by 6.6% between June 2021 to December 2022 to $516,000
  • Over the same time period, national house prices rose significantly by 26% to $831,900
  • National retirement village occupancy is near capacity at almost 90%
  • The average age of residents entering a retirement village is 75, while the average age of all residents is 81

Australia’s post-COVID-19 recovery was headlined by a sharp increase in housing prices and left many homeowners and renters in a precarious position. Older Australians are arguably at the centre of it all as aspirations to downsize or move into manageable housing are impacted by high costs and competitive markets. 

But retirement living could be the way forward for those struggling in an open market, with the average two-bedroom retirement living unit being 48% cheaper than the median house price in the same suburb. This increased affordability presents a greater incentive for those on fixed incomes looking for secure housing and ongoing independent living. 

Claire Scapinello, Chief Executive Officer (CEO) of retirement village and aged care service provider ECH, said they have seen interest in retirement living options at an all-time high in recent months.

“We continue to see demand at its peak here in South Australia. We receive about 300 calls per month at ECH, both for rental, but also for affordable housing in many of the suburbs. And it’s not just one part [of the community] looking for affordable retirement living, you see a broad cross-section,” Ms Scapinello said.

“People today are wanting to downsize, free up capital, put more money in their superannuation or actually have more for living expenses.”

Among those who opted for retirement living based on increased affordability are Lorna and John White, who sold their home of 53 years to move into one of ECH’s communities, Encore. Ms White said their move brought newfound freedom to the couple. 

“Life just changed overnight because our neighbourhood had changed a lot. Coming here was like meeting old friends. We do a lot more exercise, a lot more of everything. The people here are just wonderful, everything is just wonderful. Everyone’s so friendly you see them passing by and if you need help, they’re there,” she said.

Mr White, meanwhile, acknowledged the well-being benefits from surrounding himself with men of a similar age, and the impact of long-term life planning. 

“From my perspective, the men are all friendly and you all get along really well; something I didn’t realise I missed in the old place. People were passing on around us, leaving me on my own really,” he said.

“I didn’t really think about retirement living as an option before. I just thought about a retirement home. But now we’ve planned.”

Rising demand impacted by decreasing supply

It’s not all good news for the retirement living industry, but there are hopes key stakeholders will step in to meet supply. Current occupancy rates are almost at 90%, meaning there are limited options for older people looking to move into a retirement village. 

“At a time when national housing affordability is eroding, and health care costs are also growing, the value proposition of retirement communities is strengthening – but there are some warning bells starting to sound,” Retirement Living Council Executive Director, Daniel Gannon, said.

“The reality is we have a market that’s pretty much full… and yet barriers to building more are emerging. Higher construction and debt costs together with general economic uncertainty have applied downward pressure on the supply pipeline.”

With fewer retirement living homes in the construction pipeline – the development supply pipeline halved over the past 18 months – Mr Gannon said it’s essential the State and Federal Governments and local councils rise to meet demand.

“There are a number of key messages to Government right now. One is about unleashing supply by treading lightly when it comes to legislation that guides the retirement living industry. But also to councils around Australia, it’s time to get your act into gear. If you have development applications that are sitting in the pipeline, that are worthy of approval, then get on with it and approve them to inject more housing supply into the market.”

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