Residz Team 6 min read
Well, what a surprise that Australia recently made the Top 10 “Cheapest Countries Where You Can Retire Well” list!
Smart Asset names the Top 10 as Portugal, Malaysia, Spain, Costa Rica, Panama, Czechia (The Czech Republic), Peru, Slovenia, Austria and Australia - in that order.
Smart Asset’s Javier Simon says factors like quality of life, presence of turmoil or conflict, cost of living, and access to healthcare were taken into account.
As Australia’s retirees well know, the cost of living here is higher than the others on the list, but our beaches, nature, wildlife, peacefulness and laid-back vibe saw us scrape into the Top 10 at number 10. (Winner Portugal also has sandy beaches and a warm climate, but a much lower cost of living).
So, we got to thinking about retirement living and the options for those of us at the age where social media algorithms pepper our feeds with bunion treatments and elastic bandages for joint pain. Here are a few thoughts…..
International retirees
For all that Australia offers retirees, options have become quite limited for those overseas residents wanting to retire here. The Retirement Visa (subclass 410) was scrapped in 2018 for new applicants.
Permanent residency is still available under the “Golden Ticket” or Significant Investor Visa (SIV) scheme, which requires a minimum investment of $5 million.
Other options have long queue times. Home Affairs says new Contributory Parent visa applications (that meet the criteria to be queued) are likely to take at least 12 years to be released for final processing.
Aged Parent visa applications are likely to take at least 29 years.
Domestic downsizers
Retirement often means downsizing.
Downsizing from a large home into a smaller home can free up capital to pay off the mortgage (35.9% of mortgagees are aged 55 to 64), and/or allow retirees to travel, contribute to their superannuation, keep up with expenses, or help out the kids.
Anna Warwick in The Property Tribune says research shows more than 600,000 households planned to downsize to a smaller property between June 2022 and 2023. Not all of these will be older Australians.
Many younger homeowners smarting from higher interest rates will be competing for the smaller homes in good areas in an effort to reduce their own mortgage stress.
Over-55s
Once you hit the ripe old age of 55 you have more options than when you were younger. You can stay where you are, downsize, upsize, buy into an over-55s community or an over-55s retirement village, or rent in a rental retirement village.
Many older Australians will choose to stay in the family home, especially if their adult children are living at home longer.
And, plenty more will prefer to move to a low-maintenance unit. Most of these will be sold with “strata” or “community” titles.
“Strata” and “community” title
In NSW and ACT the term "strata title" refers to multi-unit developments where each unit is individually owned, while "community title" developments have common property areas that are jointly owned.
In other states and territories, the term "strata title" is used more broadly to refer to both types of developments.
According to the 2016 Census conducted by the Australian Bureau of Statistics (ABS), there were 2,449,645 occupied private dwellings in “strata title” or “community title schemes”.
This represents approximately 25% of all occupied private dwellings in the country.
Pros and cons
Jointly owning common property areas (“community title”) has its pros and cons.
PROS:
Maintenance: Older people may not want to mow lawns or clean swimming pools. It’s common for a body corporate or owners corporation to take care of common areas and facilities, such as swimming pools, gyms, and gardens.
Security: Many community title properties have security measures in place, such as gated entrances and surveillance cameras, which can provide peace of mind.
Social opportunities: Living in a community offers an opportunity to socialise and make new friends, and there may be organised activities or events.
Lifestyle amenities: Some properties offer country clubs, golf courses, tennis courts, and community centres.
CONS:
Fees: Community title properties typically have fees associated with them, such as strata levies and sinking funds. Coupled with the high cost of living, these fees can be a burden for people on a fixed income.
Rules and regulations: There may be restrictions on such things as pets, noise, and renovations.
Lack of privacy: Living in a community title property means sharing common spaces with other residents and all the positive and negative consequences of that.
Lack of control: As a member of a community title property, residents have to abide by the decisions of the body corporate, which may not always suit them.
Retirement village
Consumer Affairs Victoria says “strata title” is a common contract offered by retirement villages run for profit.
You pay the agreed purchase price to the unit owner, usually through their selling agent, such as the retirement village operator or an estate agent.
Consumer Affairs says that unlike other strata-title schemes, buying a retirement village unit is conditional on:
You will need to pay owners corporation fees and maintenance fees, and when you sell the unit you may need to pay exit fees, and a share of any capital gain.
Leasehold or licence retirement village
Another option is to buy a 99-year lease on a unit or villa in a leasehold or licence retirement village.
According to Balance Aged Care Specialists, you don’t own the building or the land in this case, but neither do you pay stamp duty and you are entitled to occupy the unit or villa for the duration of your lease.
It says the only difference between the two is that leasehold villages will register your lease on the title while licence villages will not.
Balance says you pay monthly fees to cover council and water rates, building insurance, building and garden maintenance and the cost of your 24-hour emergency call system.
The village operator cannot make a profit on these fees and they generally cannot be raised unless the residents agree to the increase.
Company title
A different option again is to buy shares in a company that owns a retirement village. The shares give you the right to occupy a particular unit in the village.
This is called a “company title” scheme.
Consumer Affairs Victoria says a Board of Directors, appointed by the shareholders, operates the retirement village and you will be required to comply with the company’s constitution.
If you leave, you will be entitled to receive the sale price of the shares at settlement, less any outgoing deductions.
Rentals for the over-55s
Another option is to rent in a rental village. There are approximately 300 of these rental villages across Australia built from 1995 to 2005, mostly in regional areas.
According to Aged Care 101 “virtually none” has been built since because of the cost and potential return. As a benchmark, it says, consider 70% - 80% of the pension as the weekly rental fee. There is no contract - most are a week to week rental agreement.
It says there are two types of rental village:
Get advice
Before you sign any contract, make sure you get independent advice about what you are agreeing to.
As Consumer Affairs Victoria advises:
“Before signing, take all documents about the retirement village to a legal practitioner or financial adviser who understands the legal and financial implications of retirement village contracts.”
Research and Reduce Real Estate Stress with Residz
Residz can help buyers and sellers reduce the stress:
Photo by Ryan Reinoso on Unsplash