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A retirement revolution

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Developers are working overtime to meet the demand for ‘last stop’ accommodation, and they are targeting younger buyers to move to estates for the elderly to enjoy the lifestyle long before they need the care facilities

Retirement living in South Africa is undergoing a huge metamorphosis as the traditional – and often unattractive – concept of ageing is replaced by an alluring promise of lifestyle and comfort.

Developers are already furiously playing catch-up to meet the growing demand for retirement accommodation, and they are changing their approach to those they want to attract.

It is the younger buyer they are targeting on the premise that a person should not have to move late in life to their final destination. Some developers are even lowering the age at which you can move into a retirement complex.

Read: A new ‘old-age lifestyle’

           Retirement capital of SA

          Longer lives push up the demand for retirement accommodation

“Residents should be spending their last 30 years in a wonderful place, and not just their last five, when they cannot really appreciate it,” says Murray Collins, director of Collins Residential. The company has invested in retirement villages that attract a younger market in some KwaZulu-Natal estates.

They’re not the only ones to move their focus. 

Wesley Smith of Carmel Properties, which launched the retirement estate Shoreline Sibaya last year on the north coast of KwaZulu-Natal – fast becoming known as the retirement capital of the country, says they have reduced their age limits for entry from 55 to 50 so residents can live there for longer.

“They can live here now with their mates, and go to the bars and gyms, and then continue to live (that lifestyle) here in their older years.”

This sports and leisure centre at Val de Vie Lifestyle Retirement Village in the Winelands is indicative of the lifestyle today’s retirees want. Picture: Evergreen Lifestyle

Continuous Care

The evolution of retirement living into an appealing lifestyle that begins much earlier in life brings the issue of care into the spotlight as these new-age villages will still have to provide healthcare for these residents when they eventually need it.

It is an issue that Arthur Case, chief executive of retirement brand Evergreen Lifestyle, which already has five retirement villages in the Western Cape, one in Gauteng and is developing two in KwaZulu-Natal, refers to as the “continuous care” model. 

In Evergreen’s case, a separate and “discreet” healthcare element sits behind the “beautiful” lifestyle it offers.

Case explains that retirees live in the village, independently in their homes, and stay in these homes “for as long as possible”.

Care can eventually be provided for in the home, but when it gets to the point where it cannot continue, the care centre offers frail care, including for dementia, as well as primary care for healthy residents.

“It is important that we can provide care right through to the end of life. So once you buy, you do not exit.”

In fact, care in retirement villages is of “paramount importance”, agrees Collins, which is why the company confirmed in its sales agreements that it would build its healthcare facility first. 

This is unique because the barrier to entry in this business is the ability to fund the healthcare element before sales.

“Most developers sell out and then develop because they need the money. We were fortunate to put up our care facility up at the same time as the first houses go up,” Collins says.

Similarly, Smith says Carmel Properties is also investing in the care element, so the “very first brick in the ground at Shoreline Sibaya” is the care centre.

Retirement living accommodation like Joburg’s Evergreen Lifestyle Village Broadacres, which offers a town-and-country-feel lifestyle, is now being marketed to younger buyers who can enjoy the lifestyles for longer. Picture: Evergreen Lifestyle

The investment models explained 

Full Ownership vs Life Rights Full Ownership – Like most property purchases, this entails buyers purchasing units, often earlier in life and then letting them until they need to move in. Life Rights – This entails the purchase of the right to live in the property for the remainder of a buyer’s life, but not the actual asset.

Some equate it to paying a lifetime’s rental in advance. The main difference, says Murray Collins of Collins Residential, is that a life rights buyer is investing for his or herself, and not their children.

The company does not sell life rights, but he says the concept is “fantastic”. However, it is a challenge to get buyers’ minds around it. Evergreen uses the life rights model and Arthur Case agrees the product is complex.

“It took time to explain to people as the only thing they know is they forfeit capital growth on the unit they live in because the asset belongs to the developer and they only have right of occupation. The benefit of life rights is the investment you make in lifestyle.

“I can’t compete with freehold and sectional title developers in terms of the financial investment, which is why we do not attract the investor market. But it is very difficult for them to match us in terms of how we manage the retirement lifestyle.”

Care, financing are the challenges

Continuous Care model  The retirement development industry is booming, but the issue of care still poses major challenges. The ‘continuous care’ model, for example, is a huge trend, but how do retirees fund this? 

“Frail care, no matter how well you build units or work out the right number of units, is expensive, and most medical aids do not cover any kind of frail care,” Evergreen’s Arthur Case says.

New insurance or medical aid products could be a solution. Another could be cross-subsidies, which he favours, but admits most developers do not. “With this a portion of your levy goes towards frail care so when it is your turn to be there the costs are not so astronomical.”

“Dropping” retirement offerings into established estates can also assist because, if all residents use the care centres and/or take in patients from “outside”, it can help make the financial model better.

“But this is a real problem going forward and we need to find a solution to it.” 

Frail care is expensive and not covered by most medical aids. Picture: Supplied

Financing – Retirees also face purchasing challenges because, due to the nature of the ‘life rights’ model, they cannot qualify for mortgage bonds.

However, in most cases, the average middle-income South African family has a family home that is paid for, and some type of modest retirement savings either through unit trusts or retirement annuities, Case says.

“The way we proceed is that we intend to try to bring to market a product at a price that is slightly lower than the comparative free-market price so that, hopefully, when you sell the family home to buy a ‘life right’, this can free some capital which can augment your retirement savings.”

Even buying sectional title units in the traditional way has been an “incredible challenge” for retirees, Carmel Properties’ Wesley Smith says.

This is because banks will not grant a retiree a mortgage bond even if they already own a home worth more than the unit they want to buy. The company was therefore forced to find a partner organisation to provide guarantees on behalf of its buyers. “So we come along and carry some of the risk with them.”

Let’s avert the Australian crisis

Lack of continuous care plunged one of Australia’s biggest retirement brands into crisis after residents who bought life rights were forced to move out of their homes because the right care was not available. 

Arthur Case, chief executive Evergreen Lifestyle, says: “They painted themselves into a corner because they did not pursue the ‘continuous care’ model. Their focus was on lifestyle. They had hundreds of people enjoying the independent lifestyle, but when they needed care, it wasn’t available. They were then forced to exit their ‘right of occupation’ agreements to go to find that care.” 

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