Australia’s aging population has spawned a boom of development catering for people over 50.
According to a 2021 Property Council of Australia Survey, retirement village occupancy has risen 3 percent to 90 percent, and 42 percent of all retirement villages are in Queensland.
So, before you decide on your retirement options, we reveal 12 hidden retirement village costs that you need to consider before you buy and before you sell.
12 Hidden Costs of Retirement Villages You Need to Consider
‘Rightsizing’ to a new home after the age of 50 should be a simple proposition – sell your family home and then buy into a retirement village with the proceeds of the sale of your home funding your future lifestyle.
Unfortunately, it’s a lot more complicated than that.
1. Entry Fees
One common type of entry fee is the ‘ingoing contribution’ or ‘entry contribution’, which is a lump sum payment made by the resident at the beginning of their occupancy in the retirement village. Depending on the village, this fee can range from tens of thousands to several hundred thousand dollars.
The fee doesn’t necessarily mean that you own your home.
Under a loan-license arrangement, the resident pays an upfront fee or ‘loan’ to the retirement village operator, which is typically a percentage of the unit’s purchase price. In return, the resident is granted a license to occupy the unit for the specified period and access to the village’s facilities and services.
At the end of the nominated period, the resident must vacate the unit. The operator will refund the original loan amount, subject to certain deductions such as refurbishment costs or a portion of any capital gains.
2. Stamp Duty
In Queensland, stamp duty may be payable on the purchase of a retirement village unit, depending on the specific ownership structure of the village. For example, if the resident holds a leasehold interest in the unit or has an ownership interest in the village through shares or a trust, stamp duty may be payable on the purchase.
The Queensland Government has a handy online calculator to help you work out how much stamp duty will be.
3. Service Fees
In addition to the ongoing costs of living in the retirement village, such as rent or ongoing maintenance fees, some villages may charge other fees for specific services, such as cleaning or laundry .
This varies from depending on whether the retirement village operator operates as a profit or non-profit.
4. Administration Fees
Some retirement villages may charge other fees, including contract preparation or administration fees.
5. Insurance Fees
Residents of retirement villages may have to pay for insurance for their unit, including building and contents insurance.
6. Exit Fees
Many retirement villages in Australia charge exit fees when residents leave. These fees may include deferred management fees, capital gains fees, and refurbishment costs.
These fees eat into the amount you receive when you decide to sell your home and may come as an unpleasant surprise, especially if you were looking to use the sale price to fund your next home or advanced care.
7. Deferred Management Fees
Deferred management fees can vary widely depending on the individual retirement village and are calculated as a percentage of the sale price of the unit or apartment when it is sold. The percentage can vary depending on the village but is usually between 20 percent and 40 percent.
8. Refurbishment Fees
Retirement village operators typically charge refurbishment fees to cover repairing or upgrading the unit or apartment once the resident vacates the premises. These fees may be charged at the end of the resident’s occupancy or when the unit is re-sold.
The refurbishment fee is usually outlined in the retirement village contract and can range from a few thousand dollars up to tens of thousands of dollars, depending on the size and condition of the unit and the extent of any required refurbishments.
9. Legal Fees
Residents may need to pay for legal advice or services, particularly when reviewing and negotiating the terms of the contract.
10. Marketing & Advertising Fees
To sell the home, the operator of the retirement village may charge fees for marketing and advertising the property.
This could amount to thousands of dollars which will affect the price you receive for the sale of your home.
11. Sales Commission
If the retirement village operator employs a real estate agent to sell the home, the resident may have to pay a commission on the sale. The commission is typically a percentage of the sale price and varies between operators.
12. Capital Gains Fees
Some retirement villages may charge a capital gains fee on the sale of a home, based on any capital gains made by the resident.
Depending on the operator, this fee ranges from between 37.5 percent to up to 50 percent of the capital gain.
For example, if you bought into a retirement village at $450,000 and sell for $600,000 you could be obliged to give $75,000 to the village operator.
6 Benefits of Choosing a Lifestyle Resort Over a Retirement Village
Looking at different retirement living options? Land lease communities like Living Gems offer a unique model for over-50 resort living. Here’s why:
1. No Entry Fees
At Living Gems, you own your home outright. There are no entry fees. The only ongoing charge is a modest site rental fee to cover resort facilities and onsite management.
2. No Stamp Duty
As you are technically renting the land you are on, there is no stamp duty to pay. This can save you thousands of dollars.
3. No Exit Fees
Living Gems resorts charge no exit fees should you decide to sell your home.
4. No Deferred Management Fees
There are no deferred management fees either at Living Gems. This gives you and your family certainty when it comes time to sell.
5. No Refurbishment Fees
Living Gems resorts do not charge refurbishment fees should you decide to sell your home.
6. No Capital Gains Fees
It’s your home! You should keep 100 percent of the capital gains when you sell. Living Gems resorts never charge capital gains fees.
Look at the Living Gems Difference
If you’re asking yourself how to choose a retirement living option that will tick all the boxes for you, then look no further than Living Gems. We are definitely not a traditional retirement village.
With exceptional facilities and resorts nestled in Australia’s most desired locations, Living Gems provides a vibrant community for people just like you. Enquire with us today or reach out and request an information pack.