Retirement Village Shortage

With regular reports of an undersupply in retirement village stock, the first wave of baby boomers having commenced retirement and the current macro-economic conditions…..where to for retirement villages?

The supply and demand dynamics have been captured perfectly by villages.com.au (Chris Baynes, 27/03/15) as follows;

“Based on forecasting data, Australia needs to build 5,500 new village homes – the equivalent of 55 new retirement villages – every year for the next few years but increasing just to keep up with population growth. This year we will build just 2,600 homes. So unfortunately we are going backwards – and at an accelerating rate.”

How do the current macro-economic conditions impact on the above?

It is widely reported that current Sydney and Melbourne housing prices are on the rise, with the CoreLogic RP Data Home Value index showing Sydney prices have risen 14 per cent and Melbourne 5.6 percent over the past year. Given that the average Australian property cycle lasts approximately 7 years where does that put a 65 to 70 year old home owner if their house is not on the upward side of this cycle given the above supply and demand fundamentals? Could it put retirement villas out of reach on the downward side of the cycle? Feeding into this for now is that interest rates still appear to have a downward bias (Markets are currently pricing in a 70 per cent chance of a rate cut in May, SMH April 12, 2015) thus providing support at least in the short term to the current housing markets.

Only time will tell. In the meantime Oak Tree is doing its bit to increase supply with strong development across all our villages on the east coast throughout 2015.

 

Until next time.

Kind regards, Hamish

Treasurer and Chief Financial Analyst