THE retirement sector has not been immune to the credit crunch, according to a joint study by Ernst & Young and the Australian Property Institute.
Ernst & Young real estate advisory partner Marcus Willison added that transactions have slowed and discount rates are increasing – compared to two years ago when portfolios were selling at premiums.
The EY – API Retirement Study to June 30, found that discount rates increased by at least 1% – 2%, when compared with the peak of the market in late 2007, and growth rates have also softened.
“Serviced Apartments typically experience low capital growth rates, and within the current environment are experiencing relatively high levels of vacancy,” he added.
API President (Vic) Chris Plant said recent data reveal the Australian retirement market currently has 1800 retirement villages with 76,000 residents.
“Studies suggest 3.25% of population 65+ currently live in retirement villages with potential to reach 5%,” Plant said.
Plant said the United States experience was more than double at around 7% of population.
Despite current market negatives, Wilson believes the retirement industry is an established and maturing property market with a high level of acceptance.
He said the DMF income has a high degree of certainty as rollover of the unit will inevitably occur upon the resident exiting the village or moving into cared accommodation. Therefore the variable is one of time only.
He added that the ageing population trend within both Australia and New Zealand will have a marked impact upon the growth of the retirement village industry with the number of people aged 65 and over is forecast to double and triple within New Zealand and Australia within the next 35 years.
“If conservatively, the take up of retirement village units amongst people aged 65 was to remain constant, this would still necessitate a marked increase in the number of retirement village units required, given the relative increases in aged population.”
He predicts the numbers of retirement village units will more than double by 2021, around 128,256 units – compared to the current 59,745.
“Despite the negativity towards all property sectors, the E&Y – API Retirement Study found that of all property sectors the retirement sector potentially offers significant growth in years to come,” Wilson said.
Australian Property Journal
