Article: Speak Easy

Is Rightsizing  Right For  Retirees? with Michael BoturIs Rightsizing Right For Retirees? with Michael Botur

Downsizing: it’s not just a Matt Damon movie that nobody watched. Downsizing is a reality for more and more New Zealanders because:

• In the NZ European/Pakeha cultural group – the largest in NZ – elders
don’t tend to live with their children once they reach retirement age

• Our population is aging - the number of New Zealanders aged over 65
today is 756,000 or 15% of the population. By 2038 that number is projected to be
1,340,000 (21% of population).

• There is more and more awareness of how retirement village leasehold
properties don’t provide much of an investment return (the Retirement
Commissioner has been probing ‘the fairness of a village resident’s exposure to
capital loss if the property market depreciated’)

• Nobody’s using the word ‘downsizing’ any more, anyway. All the hepcats are
saying ‘rightsizing.’

Retirement Commissioner Diane Maxwell pointed out in march 2017 that most people who choose to live in a retirement village currently fund the move by selling their family home. However, due to home ownership rates being so low, by 2030 around 200,000 people aged over 65 will not own the place where they live.

In the whitepaper ‘Right-sizing, residential care and retirement villages,’ Maxwell suggests village operators “need to consider offering a wider range of occupancy options.” That’s a diplomatic way of saying that moving into a retirement village has tended to be more beneficial for the village operators than the elderly person (the operators are often successful enough to be listed on the stockmarket). The Retirement Commission has in fact been conducting regular monitoring in retirement villages and making suggestions on the Retirement Villages Code of Practice.

On August 7, Retirement Commissioner Diane Maxwell pointed to the Abbeyfield model of retirement living as a part-solution to the pending retirement housing crisis.

Maxwell said the Commission for Financial Capability has found 70 per cent of people over the age of 65 owned their own home without a mortgage, with 14 per cent mostly-owning their home. She wants the elderly not to lose the assets they’ve spent a lifetime accruing.

Abbeyfield homes, run by charitable trusts, comprise of studio apartments with ensuite bathrooms connected by a large shared communal living and dining area. A live-in housekeeper is employed in Abbeyfield to clean and prepare two meals a day. Rent tends to be less than NZ superannuation payments (currently $801.74 after tax, fortnightly, if you’re single, or $616.72 fortnightly per person if in a couple).

So that’s a good downsizing option (and yes, Whangarei does indeed have Abbeyfield housing.)

While luxurious retirement villages tend to come with high quality care and nursing for the resident, residents don’t own the units they live in, can’t sell the unit and can’t sell on their own occupation rights without permission. Once a resident leaves or dies, a new resident is invited to occupy the vacated unit. The vacating resident’s estate gets paid the amount they paid to get in, minus a “deferred management fee.” That’s often 30% of $300,000, which is a whopping $90,000. If a resident leaves a retirement village, occupation rights to the unit can be sold for more than what the last resident paid. The village operator keeps the profit.

Also, village outgoings payments (rent, utilities and other fees) are charged monthly – even after a resident’s death - until new occupation rights for the unit are sold.

So yeah, nah - anybody with a mortgage-free home looking for a place to go after retirement might just want an apartment or a newly - build home. There are plenty of house and land packages available in Whangarei starting from $500,000. Keep on the look out by reading PropertyPlus or alternatively, surf the almighty WEB!

Michael Botur has published journalism in NZ Herald, Herald on Sunday, Sunday Star-Times and Mana and he writes a lot of fiction. He moved to Whangarei in 2015 and was ecstatic to be able to afford a house here.

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