Real Estate Investor Magazine South Africa October/ November 2019 | Page 61

Middle and lower markets
There are a myriad of number and types of new villages
that are catering for the affluent, but few are thinking about
catering to the middle-income or low-income brackets.
The middle class can swop the value they realise from their
homes to purchase into a village, with a little bit extra to
supplement their pension. Joe Duvenage CEO at Residentia,
whose 14 villages caters to this market, is concerned given
the increase in demand for rentals in this sector.
Bouquet of services
The service offering and look and feel of retirement villages
are undergoing changes - due to newer retirees and their
requirements. The newer generation is most definitely not
a Silent one.
Vagn Nielsen, CEO of Helderberg Village, said: “Many
people moving into Retirement Villages nowadays are
starting their second careers. While this could be attributable
to the economy, we are definitely seeing that a large majority
of new retirees are simply not accepting the traditional
retirement age of 60-65 and are still actively involved with
business or professional activities.
“The first questions from prospective
buyers are about the speed of the fibre
network and availability of streaming
services. Retirement Villages need
to keep up with technologies that
facilitate people’s lifestyles.”
With the above in mind, your traditional old-age-homes
are no longer attractive - retirement villages need to adapt
to remain desirable to a new generation of retirees. The first
questions from prospective buyers are about the speed
of the fibre network and availability of streaming services.
Retirement Villages need to keep up with technologies that
facilitate people’s lifestyles.
A newer trend in some areas, is apartment living offering
the lock up and go option. This is attractive to many retirees
but is dependent on the location.
Frail care
Scale is what matters. A smaller retirement village with a
12/15 bed frail care unit is not viable.
According to Arthur Case, Marketing Director of Evergreen
Lifestyle, one of the greatest challenges is the competition
for scarce nursing resources with hospitals and other care
facilities. One approach suggested to resolve this crisis is
for the retirement village industry to think about doing their
own training to fill the gaps.
There is a rising demand for dementia care and will
continue to increase over time. However, it does require a
specialized design of buildings and significant care when
selecting finishing’s and furnishings. For example, a dark mat
on the floor to a dementia patient signifies a hole.
Life rights vs sectional title
As the understanding of the consumer increases, the life
rights model seems to be gaining traction in South Africa.
Case suggests that in order to make a Life rights model viable
it needs a minimum of 300 units.
Pitfalls for developers, considering life rights using this
model, is the long-term commitment where you invest
now for greater returns later. Do keep in mind that when
assessing this model that the operating levy cannot change
unless an escalation clause is written in the contract and that
no special levies can be raised. According to Duvenage there
are life some rights models which are being adapted to take
into account the longer lifespan of retirees.
Developers wanting to enter this market using sectional
title should; firstly, ask themselves who their target market
is, secondly, what services they will be offering and, thirdly,
carefully look at the long-term financial sustainability of the
development.
A recommendation by Nielsen is that developers should
incorporate a Levy Stabilisation Fund, even if the contribution
is low, to ensure the stability of the development. Levy
increases may outstrip retiree’s ability to pay.
So, what does the future hold…
The main consensus is adaptability. This can be seen in a
number of areas; like design of homes and management
style. A healthy 60-year-old who is still working has no desire
to see requirements that fit a frail 80-year-old in their home.
But it does need to adapt to cater for changing needs unique
to the individual, for example, drywall options to create an
office etc. Newer generations are also not interested in a
shopping list of rules that restricts their lifestyle. They want
and demand choice.
We may see the trend coming here from Naturally
Occurring Retirement Communities (NORCS) overseas. This
is where a community that has 50% of households with
residents over 60 deciding to work together to support one
another without leaving their homes. This type of retirement
option would lend itself well to a complex or cluster in South
Africa. This is another form of Age-in-Place.
Michael Zipp, CEO of Cape Peninsula Organisation for the
Aged (CPOA), suggests that the Vertical model vs Horizontal
may become the norm. With an 80sqm unit with 2 beds
becoming the gold standard alongside a few 120sqm 3 bed
units.
As Eskom and other Government services, as well as
dwindling natural resources, become more unstable the
desire to live off the grid will become more attractive to
prospective buyers. It also reduces the monthly costs
significantly, further enhancing attraction.
Restaurant experiences are also becoming more of a
necessity than a luxury. The idea of queuing in a dining hall
for mass produced food is becoming less attractive to new
retirees. The expectation is to have a restaurant experience
with upmarket décor and a menu to match, which also
considers aging health issues.
Greater differentiation will be the name of the game.
Moving forward retirement villages offering Sectional
Title, Life Rights and rental options with a continuity of
care solution (including dementia care) will become more
attractive. Greater lifestyle options will also increase
attractiveness.
With aging villages competing with newer villages, there
are three areas where aging villages can still compete:
demonstrable history of a well-run village; quality of service,
environment etc. and lastly; green credibility.
In summary, the retirement village industry is changing
- driven by a changing retiree profile. The challenge for
developers is determining who that customer will be in the
future and what their demands and expectations will be
when looking for retirement solutions.
SA Real Estate Investor Magazine OCTOBER/NOVEMBER 2019
59