Before we start off, we want to make one thing clear - retirement village units are not investments. You are NOT buying a house; instead you are buying into a lifestyle. And you will lose 20% to 30% of your purchase price when the unit is resold. You will also be forced to pay a weekly fee and live by a set of rules. Before making any decision, it's essential to triple-check everything to make sure you understand exactly what awaits. Residents all over New Zealand speak warmly of their retirement village life, but if you get it wrong it will almost certainly become a very costly mistake. 

New Zealand's Retirement Village Industry in 2019

• New Zealand is seeing a boom in retirement properties springing up all over the country. What’s on offer ranges from pokey units on busy roads to luxurious resort-styled villas on leafy grounds.
• The benefits of retirement villages are extensive, and all aim to offer a comfortable, hassle-free retirement where all household worries are taken away - in theory.
• But there are many things to watch out for, and for the first time in New Zealand, MoneyHub has published a guide to retirement villages that looks at the pros, cons, must-know facts, FAQs, what to watch out for and checklists. 

As this is the first version of our this guide - if you have any tips or comments which would help our readers, please contact our research team. 

Know this: 

• Making the decision to move into a retirement village can be complicated, and it's hard to know what to ask without knowing all the risks and drawbacks. Not knowing something until it's too late could create problems.
• With most retirement units, you are not buying a freehold property, i.e. you won't own the land. This needs to be considered to ensure value for money, given land values in parts of New Zealand are at record highs. For example, you may say "$750,000 for a two bedroom unit in Auckland is not too bad" but in reality it's built on land you don't own, so the value is much less.   
• Few people know or understand that the retirement unit you buy may go up in value, but what you or your estate will receive is between 20% and 30% LESS of the original price when it is later sold.
• In addition to the upfront costs, there will also be ongoing costs every week for the use of the facilities, as well as other fees that can catch residents out.
• To avoid unpleasant surprises, knowing what you are committing to in detail before selling up and moving in is the only way to ensure a comfortable experience.

What is a retirement village, and how is it different to a rest home?
Retirement villages are designed to offer independent living facilities, by way of a townhouse, villa or apartment. Some properties offer additional facilities, such as serviced apartments, care suites, rest homes, hospitals and dementia care units. The benefit of a continuum of care retirement village is that it will offer a range of facilities which can be used as needs increase. This provides far less disruption to residents who can transfer between facilities within the property as needed, either for the short term (i.e. when recovering from an illness) or long term (if the individual develops dementia or needs assisted living). 

Rest homes, often confused with retirement villages, are specific facilities where assisted living (meals, nursing care etc) is provided. The often have dementia and non-dementia wards and are far smaller in resident numbers. Unlike retirement villages, residents do not enjoy independent living. In most instances, residents pay a weekly fee to stay rather than buying into the rest home. 

Many media stories, such as this North & South feature, talk about the costs and fish hook terms and conditions that often given the impression of profits before people. Our list below outlines how retirement village companies make their money, and what you need to understand before signing up.

It is no secret that retirement units rarely make good financial investments, but beyond the money they offer an unrivaled quality of life experience. Many residents claim they have never been happier in retirement villages, some have even reported in media stories that they regret not moving in sooner. In this section we outline the benefits of retirement village living.

It depends on what you are buying; like residential property, there are many different options and grades. As you would expect, the higher the quality, the more you will pay. Also, the facilities on offer range between properties, and this will be factored in to the upfront price. Generally you can budget between $200,000 and $800,000 for a one or two-bedroom unit, depending on the location. Three bedroom villas in top Auckland suburbs can command as much as $1.5 million. In our survey, we (unsurprisingly) found Invercargill to offer the cheapest units, where as Auckland and Tauranga offered the most expensive, consistent with land value differences between the three cities.

It ranges, but according to data obtained from the Retirement Village Association (RVA), the average weekly fee across New Zealand stood at $121 in 2018. This covers maintenance and the costs of running recreational communal areas, as well as administration and support costs. But often this won't include power, phone, and internet, so it's important to check before signing up to make sure you're not caught out. 

Most residents pay their weekly fees from their New Zealand Superannuation, and data from the RVA suggested that while there has been of less than $2 per week between 2013-2017, if fees do go up it directly cuts into what is left over from the weekly superannuation payment.

What happens if I can no longer afford the ongoing fees?

• The Retirement Villages Act gives you the right to consultation on anything that affects your occupancy or ability to pay. This means your financial situation must be discussed with you and follow a procedure - immediate eviction is not permitted.
• In some cases, you can ask to negotiate to defer payments which will be deducted from the unit price when your move on from the retirement village. If this is not an option, you can apply for a government assistance - the Accommodation Supplement may be available if you pass income and assets means tests. 

​Retirement village companies make their money in four ways:

1. Charging upfront for the unit price, at market value (which will almost certainly always be more than the cost of building it).
2. Charging a ‘deferred management fee' (DMF), the 20%-30% fee deducted from your original upfront purchase price
3. Charging weekly ongoing maintenance fees to live in the retirement village.
4. Receiving the capital gains on your unit once it is sold, i.e. if the market price increases, the retirement village company sells it for more and keeps the difference between what it receives and what you paid.

A LTO gives you the right to live in a unit and have access to the retirement village's facilities and services, but it does not give you ownership of the unit. The offer of these rights is made in an Occupation Right Agreement (ORA).  The ORA is your contract and it covers:

• Upfront and ongoing payment obligations
• The village manager’s duties
• Procedures relating to meetings and consultation
• Termination rights and the complaints and disputes resolution process.

The Retirement Villages Act 2003 sets out in very specific terms what must be included in the ORA, specifically:

• What your costs will be on entering the village, on-going costs and how much you will be paid on leaving the village – this last amount will depend in part on how long you have lived there;
  
• The terms of transfer in villages where the occupation right agreement allows you to transfer from an independent self-care residential unit to a unit offering a higher level of care.

This varies from village to village, but most commonly it is the village operator. The specifics will be outlined in the ORA. It's important to know that in most cases, the capital payment, less deductions (such as the deferred management fee), will not be repaid until the unit has sold.

Usually, no. Some operators may offer a 'peace of mind' option to back out after a certain number of days, but this is rare and does come with specific terms and conditions. This means making your decision is even more important as there is no turning back. So if you fall out with a neighbour, get allergies from the garden or find the facilities lacking, you'll need to find solutions to make things right.

Contracts drawn up after 2008 have to be very precise about costs and fees, thanks to the Retirement Villages Code of Practice 2008. A retirement home rip-off story on Fair Go highlighted the risks involved. Anyone who moved into a retirement village before this should have their contract checked, with the help of a lawyer, as it’s possible that changes could be made to bring them more into line with current agreements. 

The decision making process for deciding on a retirement village should not be rushed. To help you decide, we've linked to some well regarded and extensive checklists below:

• Consumer Magazine's checklist addresses facilities and welfare
• RVA New Zealand's checklist addresses the reasons why you want to move, and the retirement village's general operations
• Sorted's checklists address lifestyle and financial considerations

A retirement village is not the only solution to assisted living, and there are many alternatives. Some of these include:

1. Downsizing your home to a smaller, single-level property with no gradients.
2. Modify your existing home with ramps and/or rails.
3. Arrange assisted-living and/or visiting carers, depending on what your needs are. This can include cleaners, home-help, assisted support. It can be paid for by selling down investments, family support, government help and/or using equity release mortgages to make money available.