The cost of buying into a retirement village is very similar to that of a standard residential house.
When you buy into a retirement village, you pay what is known as a “ingoing contribution” for the right to occupy the unit, in the form of a lease or licence. The ingoing contribution is simply the sale price or advertised price of the unit, however you will see it called an “ingoing contribution” in your contract documentation. The ingoing contribution is similar to a bond, in that when you leave and the right to occupy that unit is resold, your ingoing contribution is refunded back to you, less any agreed fees and charges.
The prices of retirement village units loosely correlate to the value of the residential homes in the surrounding suburbs. As a general rule of thumb, you can expect to pay around 70-80% of the value of the surrounding median house price. The theory here is that retirees from the surrounding suburbs sell their fully paid-off home and use the proceeds to buy a retirement village unit, with the positive difference between the two used to top-up superannuation or buy a caravan. If there is a substantial cash difference between the sale price of your old home and your new retirement village unit, you may need to seek specialist financial advice to avoid this windfall affecting your pension.
There is a very wide range of retirement village products and prices available, from expensive high-end, high-rise units to cheaper, older units. Most units are two bedrooms, however there are many other options from Studio units to generous three-bedroom homes. Basically, there is something for all tastes and budgets!
Deciding how much you want to pay for your retirement village unit is one of the first decisions you need to make. Learn more about this in our article on the Downsizing Decision.