This article is from the Australian Property Journal archive
THE Australian seniors living market is likely to move away from departure fees structure towards alternate rental and purchase models in the next decade, according Jones Lang LaSalle.
According to JLL’s national director of health and aged care Peter McMullen, Australia will adopt the rental and purchase models more commonly seen in the United States.
McMullen said the market penetration of the seniors living retirement village market in the USA is three times that experienced in Australia.
He believes that in order to increase market penetration within the seniors living market, Australia should look towards USA models in two key areas: adhering to more simplified cost structures for residents and by adopting the “continuing care” model, which allows residents to age in place.
McMullen said one of the major differences between the USA and Australia is the ease of transfer between independent living and assisted living within an integrated community.
In the USA, because the greater majority of residents are on rental agreements, the transfer can be as simple as surrendering an existing tenancy on an Independent Living Unit and entering into a new tenancy for an Assisted Living Apartment.
By comparison, McMullen said in Australia, residents considering a move from an Independent Living Unit to an Assisted Living Apartment must first terminate their lease or licence, or in the instance of a strata title unit, sell the unit to another resident.
“They are then required to pay the operator a departure fee, and finally with the proceeds received from the operator, pay the ingoing contribution for the Assisted Living Apartment. The wide range of formulae for assessing departure fees is one of the industry’s obvious weaknesses and a significant deterrent for new residents entering into the Australia retirement village market.
“While Australia offers a far greater variety of resident tenures in seniors living communities compared to the USA, this does not necessarily translate to greater choice. Rather it is the result of an industry which has struggled to identify the most marketable and commercial option within the changing regulatory regimes imposed by both the federal and state governments,” he added.
McMullen said currently the legislative framework surrounding the development of new retirement villages is such that the type of resident tenure can impact on the obligation for GST.
He believes the introduction of a broader spectrum of rental models and more simplified purchase models will increase market penetration in seniors living.
“Currently the rental model in Australia is most widely associated with lower socio economic groups, but going forward the market is likely to demand rental models within villages targeting those of higher socio-economic status,” he said.
JLL’s recently published white paper ”Seniors Living: Can Australia Learn from the USA?”, reveals that retirees’ disposable income in the coming years is expected to increase due to changes to the Australian superannuation rules, allowing people over 55 to access some of their superannuation through an annuity while still working part-time.
“Therefore, all inclusive rental packages geared towards the higher socio-economic levels that offer flexibility, the ability to downsize on the death of a partner, and a range of domestic and personal services are likely to encourage more retirees into seniors living communities,” he said.
The white paper shows that the majority of retirees in Australia and the USA choose to remain in their own home rather than enter a retirement community.
“The challenge for the industry as a whole is to increase the appeal of seniors communities. Closer analysis of the two markets and seniors living products available reveals that a clear differentiator between seniors living products available in the USA and Australia is the absence of “continuing care” within Australian communities.”
“Continuing care enables residents to age in place longer without the need to relocate to aged care facilities to receive higher levels of care. The provision of continuing care to enable ageing in place and in a manner that is economic for residents and financially viable for operators will be a major challenge for the Australian industry,” McMullen said.
Going forward, McMullen said it is likely that operators will be lobbying the federal government to extend funding to enable residents in seniors living communities to obtain continuing care rather than be required to relocate into an aged care facility.
Australian Property Journal
