Retirement village living on your own terms


By Riaan Campbell, Advisory Partner, Citadel

For more than a decade, financial services provider Citadel has been paying close attention to the trends impacting the development of retirement villages around South Africa.

Since the height of the 2008 property boom, the demand for lifestyle villages has been strong and continues to accelerate with supply keeping up pace with the demand. Over this period, some successful high-quality retirement villages have been established and, in some places, forming an integral part of greater lifestyle estate developments. The marketing around these developments typically promises a lifestyle of comfort and safety, exclusivity, and convenience.

Most of Citadel’s clients who consider lifestyle changes take note of retirement villages as their primary option and as wealth managers, Citadel keeps a close eye on the options available both in the short and long-term while trying to identify general trends so their clients can make informed decisions.

Why are retirement villages growing in popularity?

We all dream of living independently for as long as possible into our golden years, but health and vitality are among some of the personal circumstances which might encourage a lifestyle change. Retirement villages have traditionally been a natural extension to living independently with the added benefit of having support on hand when needed. Security and safety concerns, medical assistance and long-term healthcare considerations are often the most important factors influencing an individual’s decision to move into a retirement village.

Increased life expectancy due to better lifestyles and medical advances have also brought about new challenges and considerations as well as increased uncertainty around the type and level of care and assistance we may need in later years.

What are the benefits of retirement villages?

Within the cocoon of a retirement village, residents can live independent lives within the boundaries and safety of a supportive community.

Practically, however, lifestyle is just one consideration. Safety, lower maintenance costs and quick access to medical facilities are among the main benefits associated with retirement village living. The community nature of these estates also ensures access to shared facilities and a variety of activities which can improve the quality of living. Being part of a community, with the promise of interaction and stimulation, certainly plays a part in reducing the risk of social isolation. Similarly, as physical activity declines, healthcare considerations become increasingly important, making medical assistance in the event of an emergency a top priority.

For keen travellers, retirement villages also provide physical freedom. The ability to lock-up and go without worrying about house sitters, security, garden services or power outages is an increasingly attractive option for retirees and those on the cusp of retirement.

What can I expect from a retirement village?

For the most part, independent living in your own house, cottage, or apartment, is the entry point to this type of lifestyle. But the choice of estate also necessitates factoring in other issues such as public roads, the location of the unit within the village, and a comparison to units in similar villages in the area. Doing your homework about what is available is vitally important to your decision making.

Shared facilities within retirement villages include lifestyle centres with entertainment areas, a dining room, lounges, hobby rooms, a library, ladies bar, gym, a swimming pool, and other recreational facilities. Gardens and walkways are some of the main attractions for potential residents. Typical retirement villages offer security, healthcare, and nursing with 24-hour emergency response, frail care facilities and assisted living – a relatively new and widely popular consumer-orientated option.

The trend towards assisted living, rather than frail care, is designed for people who need assistance with their daily living but still wish to live as independently as possible for as long as possible. This option might be needed for many years and, depending on the circumstances, can prove rather expensive over time. This shift in offering would then relegate frail care to a facility required only if a resident is injured or recovering from an illness or surgery, or in the last few months of a person’s life.

How does ownership work?

Sectional title and life rights are the most widely used forms of ownership on offer. Full ownership and sectional titles offer the security of a title deed with the possibility of raising a bond, but transfer duty and conveyancing fees are payable. In a sectional title development, resources and responsibilities are pooled, making the burden of upkeep and the provision of facilities that much lighter on residents.

Life rights have become more popular as developers continue to be involved in the ongoing management of the village. A life right speaks to the consent granted to the owner (and spouse if applicable) to occupy a unit for the rest of his or her life. It is, in effect, a long-term lease agreement in exchange for a lump sum or an interest free loan. No transfer duty is payable. The title deed remains in the name of a trust or company, while the life right is an inter-party agreement. This can voluntarily be registered in the Deeds Office if third parties, such as a bank, need to be made aware of the Life Right Agreements.

Ultimately, however, the form of ownership is not the determining factor of the success of a retirement village, rather the effective day-to-day management put in place will determine an estate’s long-term sustainability. For peace of mind, it is important to scrutinize the sales agreement, village rules and constitution carefully or seek legal advice, if necessary, before entering a purchase.

How does profit share on the resale of units work?

Most retirement villages retain a share of the profit on resale, usually between 10% and 30%. It is necessary to go into a retirement village purchase with your eyes wide open and to accept the fact that with life right schemes, you will only receive back your original capital or a portion thereof. The profits which the retirement village gleans from this financial arrangement with its residents are then used to finance maintenance, major improvements and to subsidize the increase in monthly levies. Refurbishing of life right units by the village owners before you move in is part of the deal to keep the standard of the estate as high as possible.

When it comes to purchasing in a retirement village there is some important groundwork you need to get out of the way first and some advice you should take on board:

Do your homework. Be informed, determine which area or town you want to live in and follow the developments in that area. Consider family and friends, availability and whether the lifestyle on offer appeals to you.

Consider off plan. The best time to purchase in a village is when it is being constructed. When a new retirement village is being built in your area, have a look, and pay attention. This is when a wide choice of options is available, and you have enough time to sell your property and plan your move.

Be flexible. You need to be open to a degree of give-and-take if you are aiming to live in a retirement village, so being open to change and willing to adapt will help the transition. You may, for example, wish to consider investigating whether a particular retirement village structure may suit you by giving you a certain degree of independence. In other words, weigh up the pros and the cons.

Work as a team. Making the decision to move into a retirement village is easier when you operate as a couple, and it certainly saves a surviving spouse the stress of having to cope with a major move in the wake of a partner’s death. The best advice to follow is to start looking around in your 60s and move in your early 70s.

There are as many economic formulas for retirement villages as there are retirement villages. Since you cannot treat all these estates as a single entity, it is important to visit as many as you can to get a feel for both the inside and the outside of the accommodation, to determine who is living there and to examine the economic formula and ownership options.

Communal living is not for everyone so take the time to accept and understand your personal preferences and to assess your own willingness to adapt.

Finally, take careful note of the trends in retirement lifestyles, plan and ensure that you do not get pushed into making a last-minute choice due to a lack of planning. Rather keep your options open and remember that the best time to move to a retirement village is before you must. In other words, afford yourself the luxury of making this move on your terms.