The affordability gap between retirement units and the traditional real estate market has widened, with fresh national data shining a light on retirement villages as an affordable housing option in the midst of an affordability crisis across the country.
The new 2022 PwC/Property Council Retirement Census released recently reveals the average cost of two-bedroom Independent Living Unit (ILU) in a retirement village grew by 6.6 per cent over the 18 months to December 2022 to $516,000, while national house prices over the same period rose significantly by 26 per cent to $831,900.
Executive Director of the Retirement living Council Daniel Gannon said the fresh data shows the important role retirement villages play in providing affordable housing options for older Australians, who are often hit hardest by cost-of-living pressures because of their fixed incomes.
“On average, units in retirement communities across Australia are 48 per cent cheaper than the median house price in the same suburb,” Mr Gannon said.
“Often retirement villages are confused with aged care. They are not the same thing. Retirement Living communities offer a unique housing option that enhances wellbeing and lifespan for older Australians, and actually prevents the entry into aged care.
“At a time when national housing affordability is eroding, and health care costs are also growing, the value proposition of retirement communities is strengthening – but there are some warning bells starting to sound,” he said.
The PwC/Property Council Retirement Living Census also revealed:
- The three-year development supply pipeline of retirement units fell by more than half to 5,100 dwellings compared to the previous Census forecast of 10,500 dwellings.
- National retirement village occupancy remained steady at almost 90 per cent, which represents almost full capacity.
Mr Gannon flagged concern about the decline in the forecast supply pipeline.
“The reality is we have a market that’s pretty much full, which actually provides an affordable housing option when few other affordable options remain, and yet barriers to building more are emerging,” Mr Gannon said.
“It’s not an unfamiliar story for this part of the housing market. Higher construction and debt costs together with general economic uncertainty has applied downward pressure on the supply pipeline,” Mr Gannon said.
“Given supply is forecast to slow and with legislative reviews that will affect the sector currently underway in five separate states - Victoria, Queensland, South Australia, Western Australia and Tasmania - we urge caution to policymakers.
“If governments make it harder for operators to build and operate retirement communities, the supply clamp will tighten even further – on a sector that we know offers an affordable and bespoke offering for older Australians, who simply can’t keep up with the traditional market which is becoming increasingly unaffordable to rent or buy into,” he said.
Mr Gannon said the number of people older than 65 will increase from 4.4 to 6.6 million by 2041, presenting opportunities and risks for governments.
“Australia’s population is ageing, which means our three tiers of government need to address and solve the challenges associated with housing this demographic cohort now,” Mr Gannon said.
“If more seniors are living in age-friendly communities, there is significant economic upside for state and federal governments through reduced interaction with the health system and delayed entry to aged care,” he said.
Now in its ninth year, the PwC/Property Council Retirement Census is the industry’s premier source of benchmark data for the sector, and this latest report for 2022 is the first of the series to be released post the COVID-19 pandemic.