Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 336

The role of retirement villages in retiree housing

In retirement, many Australians need to determine the most appropriate housing option from both an emotional and financial perspective. And the housing options of retirees cannot be ignored by the financial services industry as it works towards delivering sufficient retirement income.

While the vast majority of Australians choose to ‘age in place’ by remaining in their own home, retirement villages’ popularity is increasing faster than any other age-specific housing option (Productivity Commission Research Paper). Prima facie, retirement villages provide a good solution, but currently the offer is complex and requires specialist advice.

Three reasons to move to a retirement village

Retirement villages house around 5% of Australians over 65 years old (approximately 184,000 people) and this housing segment has a number of advantages.

Firstly, transitioning to a retirement village can provide an opportunity to downsize and unlock home equity, and unlocking home equity can be key to sufficient retirement income. Yet according to the Producivity Commission, unlocking home equity is rarely the main driver of moving to a village and the majority of older Australians believe that their current home will not help fund their retirement.

Secondly, retirement villages meet retirees’ needs to feel safe, offer a range of activities and provide the necessary building features, such as non-slip surfaces and handrails.

Thirdly, retirement villages can serve as a gateway to further care such as an aged care facility.

However, there are a number of emotional barriers to moving into age-specific accommodation. A study by the National Seniors Productive Ageing Centre in 2013 cites a 'loss of independence' and 'lack of privacy' as the two most likely factors to discourage relocation to a retirement village. Atul Gawande’s book, Being Mortal, openly details the 'controlled and supervised institutional existence' that can result by moving the elderly into assisted living and aged care facilities in particular.

Financial arrangements are complex

From a financial perspective, the fee structures of retirement villages are complex and vary substantially across villages, making comparisons difficult. Further, the cost of getting it wrong can be high due to significant exit costs in some structures. A Macquarie University economist, Tim Kyng, developed the Retirement Village Cost Calculator after trying to select a retirement village for his mother. The calculator simplifies the various fees down to a single monthly cost, to help compare different options. However, when working through the calculator and the various fee structures, what appears to be a housing decision for retirement looks a lot like purchasing a complex end of life insurance product.

Despite this, legislation remains state based, standardised and comparable fee disclosure principles (think RG97) do not yet exist, and retirement villages are not ‘in-scope’ at the current Royal Commission into Aged Care Quality and Safety. On top of the complex contract, individuals also should consider how a transition (and possible downsizing) can affect pension entitlements and their future income stream.

In the absence of better regulation in this area, seeking professional advice is necessary. As advisers consider their value proposition, this is one area that could make a significant difference to the retirement outcomes of their clients. Examples of providers of specialist education and ongoing training are Aged Care Steps and Aged Care Gurus.

Superannuation funds should also consider the role they play as they grapple with designing appropriate post-retirement products, such as Comprehensive Income Products for Retirement (CIPRs). One concept floated was super funds owning residential aged care accommodation options, providing quality social infrastructure, while generating a return for their members. It would be age-specific accommodation provided for the member and owned by the member. The concept might prove an important pillar in unlocking home equity and underpin Australians’ income streams in retirement.

The Australian Bureau of Statistics projects that by 2050, there will be over eight million Australians over 70 years old. The challenges associated with age-specific housing options, the complexity of the contracts, and unlocking home equity are not going away. As we work towards providing Australians with an income stream in retirement and embark on the upcoming independent review into retirement income, we cannot ignore this housing segment.

 

Annika Bradley, CIMA® is an independent member of a number of investment committees and she provides advice to other financial businesses. This article is general information and does not consider the circumstances of any person.

 

  •   11 December 2019
  •      
  •   

 

Leave a Comment:

banner

Most viewed in recent weeks

Noel Whittaker’s take on the budget

Marketed as a fix for inequality and housing affordability, the latest budget instead delivers a tangle of tax changes that leave everyday Australians worse off.

Australia has no death duties. Technically.

Australia may not levy formal death duties, but a growing web of tax measures is quietly shaping what wealth passes between generations. Now, the 2026 budget adds another layer.

How to minimise tax with a will

Inheritance tax implications in Australia may surprise some, as poor estate planning without proper wills or trusts can lead to costly tax bills and delays for beneficiaries.

Testamentary trusts post-budget: Estate planning, tax reform and the ‘death tax’ debate

Proposed Budget changes to taxation are casting new uncertainty over testamentary trusts, prompting closer scrutiny of estate planning structures and the real implications of reforms still taking shape.

Back to the future - Why indexing CGT is a good idea

A return to indexation of capital gains would be a fairer way to compensate households for the effects of inflation than the current discount. Importantly, it opens the door to future, broader reforms to stop the taxation of inflation.

The investment mistake killing your returns

Retail investors face an increasingly complex product environment, but simplicity may be the most overlooked advantage in building a portfolio you can actually live with.

Latest Updates

Investment strategies

Choose your hedges wisely… and often

A new market regime is exposing the fragility of static hedges. With correlations shifting and safe havens flipping, investors must rethink diversification and adopt more adaptive tools to protect capital.

Investment strategies

Yields take centre stage again

The Australian credit landscape is shifting. Yields are rising, issuance is strong and spreads continue to tighten. Income is re‑emerging as the dominant driver of returns, though pockets of risk may be building beneath the surface.

Investment strategies

The grass is always greener: Rethinking Australian vs global equities

Australia's once‑dominant sharemarket is losing ground as others surge ahead, prompting investors to question home‑bias instincts. Meanwhile, the US market appears attractive. Is it time to revisit your global equity allocation?

Investment strategies

Stop asking if there's a stock market bubble. Ask this instead.

Markets continue to push onwards despite valuations looking stretched by historical standards. Bubble talk is rampant, however investors may be focusing on the wrong thing. The real story sits deeper than the headlines.

Taxation

The GST cannot stop inflation

Raising the GST when inflation jumps sounds clever on paper, until we examine how it may play out in practice. What is pitched as a simple inflation fix can lead to a sharp turn in the wrong direction for prices.

Shares

Why SpaceX is coming to your super fund

SpaceX’s blockbuster debut is grabbing headlines, but the real story for Australian investors is much quieter. Giant listings eventually filter into super funds and ETFs, subtly reshaping portfolios long before most realise.

Taxation

Is the government being honest with us about its business CGT changes?

The government’s assurances on small‑business concessions don’t withstand the scrutiny. Token carve‑outs and a lack of credible rationale for CGT changes may reshape how Australia rewards long‑term value creation. 

Sponsors

Alliances

© 2026 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.