Older retirement villages may not be the best for investors
Jones Lang LaSalle’s national director of health and aged care, Peter McMullen, has stated that older retirement villages were not necessarily better value than newer ones, despite the higher cash flows on offer.
He said the short-term returns from villages more than 15 years old may look good but were often offset by rising costs for refurbishment to meet baby boomer expectations.
Villages that were only eight to 10 years old were generally at a higher standard and required less refurbishment.
With more than half of Australia’s retirement villages classified as mature, attempts at redevelopment could also prove costly, if owners or developers had to substantially pay out residents if they wanted to revamp facilities, as many older villages had reached the end of their economic life.
Developers of new villages also had to wait six to eight years before getting a reasonable cash flow. A portfolio weighted to new villages had a low likelihood of providing a reasonable return in the early years because of low cash flows, he said.
