"Living in a retirement village has the capacity to be a great lifestyle decision, sadly it also has the capacity to be your very worst financial decision." - RETVILLDOTNET.
An example for a village with the Deferred Management Fee calculated on the ingoing $$$.
"My father must have been one of the few people who lost money when he sold his home in a booming Melbourne property market. This huge loss on his home, in a popular suburb not far from the CBD, was despite it selling for more than he paid for it. The problem? He bought into a retirement village." - Diana Thorp. Sunday Herald Sun. 22/08/21
An example for a village with the Deferred Management Fee calculated on the outgoing $$$.

Destruction of Retiree Capital

 Retirement Villages and the Destruction of Retiree Capital

A primary feature of Loan/Lease Retirement Villages (74% of the marketplace) is that despite the payment of an ingoing amount, an amount often commensurate with or near to an outright purchase price, the retiree never obtains ownership. Note below the dramatic negative financial impact this aspect has on retiree capital as opposed to outright property ownership. Retirement villages are the least understood of residential property by retirees and their professional advisors. Governments have the obligation to continually improve protections for retirees and their hard earned life savings, including those who choose a retirement village as their preferred retirement living option. The solution is clearly in an outright property ownership model.

Model 1. Loan/Lease retirement village with Deferred Management Fee calculated on the ingoing value of the unit. No share of any capital gain is provided to the retiree.  (49% of loan/lease marketplace)           

  1. Industry average occupancy period 7 years                                                               
  2. Retirement Village Living over 7 Year Lease Period                                                   
  3. Retiree Capital = $800,000.00                                                                                      
  4. Ingoing Payment/Loan to Operator = $800,000.00                                                      
  5. Deferred Management Fee of 36% on the unit ingoing amount = $288.000.00 (6%pa over first 6 years)          
  6. 5% Sinking Fund Contribution on the unit ingoing amount = $40,000.00                      
  7. Retiree Capital Cost = -$328,000.00                                                                            
  8. Resident Refundable before any exit costs after 7 years = $472,000.00                                            
  9. Unit Value after 7 years = $1,194,983.00                                                                   
  10. Capital Gain at 5.9%pa to Operator = $394,983.00.00                                                              
After just 7 years the above Loan/Lease retirement village resident is $1,194,983.00 – $472,000.00 = $722,983.00 worse off than a retiree with outright property ownership. A reduction rate of some $1,984.56 per week of village occupancy.                  

Model 2. Loan/Lease retirement village with Deferred Management Fee (DMF) calculated on the outgoing value of the unit. A share of any capital gain is provided to the retiree. (51% of loan/lease marketplace)                                                      
  1. Industry average occupancy period 7 years                                                               
  2. Retirement Village Living over 7 Year Lease Period                                                   
  3. Retiree Capital = $800,000.00                                                                                      
  4. Ingoing Payment/Loan to Operator = $800,000.00                                                      
  5. Deferred Management Fee of 36% on the unit outgoing value = $430,194.00 (6%pa over first 6 years)          
  6. 5% Sinking Fund Contribution on the unit outgoing value = $59,749.00                      
  7. Retiree Capital Cost = -$489,943.00    
  8. Unit Value after 7 years = $1,194,983.00
  9. Capital Gain at 5.9%pa = $394,983.00.00 - (Net Capital Gain to Retiree 64%  = $252,789.00) - (Net Capital Gain to Landlord 36%  = $142,194.00                                              
  10. Resident Refundable before any exit costs after 7 years = $705,040.00                                            

After just 7 years the above Loan/Lease retirement village resident is $1,194,983.00 – $705,040.00 = $489,943.00 worse off than a retiree with outright property ownership. A reduction rate rate of some $1,346.00 per week of village occupancy.

Model 3. Outright Property Ownership - Well understood by retirees and their professional advisors.          

  1. Outright Property Ownership over 7 years  
  2. Retiree Capital = $800,000.00                                                                                      
  3. Ingoing Payment/Loan to Operator = $800,000.00                                                      
  4. Deferred Management Fee = n/a          
  5. Unit/Home Value after 7 years = $1,194,983.00
  6. Capital Gain at 5.9%pa to Retiree = $394,983.00                                            
  7. Retiree Capital after 7 years = $1,194,983.00
  8. Retiree Capital Increase = +$394,983.00
After just 7 years the above Retiree is $1,194,983.00 – $800,000.00 = $394,983.00 better off through outright property ownership. An increase rate of some $1,085.11 per week of occupancy.

Property ownership delivers superior financial security to retirees, it enables them to -     

  • Move to another retirement living property by maintaining pace with rising property values. 
  • Better fund their own Aged Care requirements rather than the taxpayer.                               
  • Enable a higher allocation of funds to family/beneficiaries.                                     
  • Enables access to the Federal Government Home Equity Scheme, denied to them by loan/lease retirement village occupancy.

Real retirement village reform is desperately needed before many, many more retirees are condemned to the destruction of their life savings. Destruction over just a few years of their retirement by a single fateful decision, a decision to enter a loan/lease retirement village.

“Families need to be aware that what we are talking about here is the transfer of intergenerational wealth, not to families, but into the pockets of corporations. Shame about elderly people not having enough money for aged care” – Tom Galt, President – NSW Retirement Village Residents Association.

Which retirement living model would you choose?

  1. -$722,983.00 – 7 years of occupancy in a Loan/Lease Retirement Village no capital gain

  2. -$489,943.00 – 7 years of occupancy in a Loan/Lease Retirement Village with capital gain

  3. +$394,983.00 – 7 years of occupancy with Outright Property Ownership


Note – The tables behind these calculations are included below for reference.  

  • Industry Data shows average occupancy period in a retirement village is between 7 and 8 years.
  • Corelogic data shows last 25 years residential unit housing capital gain rates at 5.9%.  
  • Industry Data shows only 16 per cent of retirement village units are occupied on a freehold basis.

Model 1 - Loan/Lease retirement village with Deferred Management Fee calculated on the ingoing value of the unit. No share of capital gain to retiree.


Model 2 - Loan/Lease retirement village with Deferred Management Fee (DMF) calculated on the outgoing value of the unit. Share of capital gain is provided to the retiree.














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Function of Government

The role of government is to create an environment for commerce to function whilst at the same time protecting retirees and particularly vulnerable retirees from both financial and emotional harm emanating from that function.

The Victorian Retirement Villages Act 1986 provides the environment for commerce to function but fails to fully protect retirees from financial and emotional harm as a result of it.

The Victorian legislative definition of a retirement village in demanding the payment of an 'in-going' amount without the transfer of property ownership is a major contributor to that financial and emotional harm suffered by retirees.


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