Luxury retirement villages are on the rise, but is there demand?

Sunday, 25 February 2024

The Helier in Auckland is a luxury retirement village that is more like a five star hotel.

Oceania Healthcare’s The Helier is the first of a new breed of luxury retirement villages to be completed and fully open for business, but it comes at a slower time for the market.

The $150 million apartment development sits on a prime site in the sought-after eastern suburb of St Heliers in Auckland, and has panoramic views of the Waitematā Harbour, the city, and surrounding parks.

There are 111 apartments, including 32 private care residences, and the amenities include gardens, an indoor swimming and spa pool, wine library, private gym and wellness centre, cinema, and beauty salon.

But the attractions do not stop there. An in-house executive chef oversees the restaurant and happy hour canapes, there is a 24-hour-a-day butler service, chauffeur-driven hybrid Jaguar vehicles are available to use, and it is possible to have a pet.

It has been marketed as “ushering in a new era of luxury retirement living”, but Oceania is not alone in developing a very high end “later living” offering.

Northbrook, a subsidiary of Winton Land, has five upmarket villages in the pipeline, and recently broke ground on the first in Auckland’s Wynyard Quarter.

Generus Living Group is developing its high-end complex, The Foundation, in Parnell, and it completed the first building earlier this year.

Ageing is different now, and retirement living options need to be reimagined, Oceania’s Brent Pattison says.

But with the opening of its private care units last week, The Helier is the first to be fully completed, and up and running. Residents have been moving into the other apartments since late last year.

Oceania’s chief executive Brent Pattison says the village is set up like an exclusive, five star hotel and bears little resemblance to the traditional village model.

Many of the residents are still working, or very active, but are at a different stage of their lives, where they want more security and convenience, and less to worry about, he says.

“There are different ways of ageing now. It’s not like it used to be, and people are no longer happy to be put somewhere and told what to do. Many of our residents would have rejected a traditional village.

“With The Helier we wanted to reimagine later life living. So while we provide the built environment, it is really about serving residents to ensure they have the best life possible, and in a way they can fit in with their community.”

But the company also worked to make the complex a beautiful place where people want to live, he says.

“Residents are making an investment with us, so we want to make sure that they can see and feel that we have made an investment in them.”

Panoramic Auckland views provide a backdrop to The Helier’s outdoor living areas.

This style of “later living” does not come cheap. At The Helier, prices range from $1.8m up to $3.5m, depending on the size and outlook of the apartment.

Sizes on offer are one- and two-bedrooms, and two-bedrooms with a flexible third room, but every room has a balcony and a view.

The only three-bedroom apartment is the penthouse, and that has been pre-sold for over $5m.

Likewise, prices for Northbrook’s Wynyard Quarter village range from $1.45m for a one-bedroom up to $13.75m for the penthouse, while some apartments in The Foundation have been sold for between $3m and $4m.

Those prices buy residents an occupancy rights agreement (ORA). It gives them the right to live in the apartment, and when they leave or on their death they, or their estate, gets back the capital paid minus a deferred management fee.

The Helier’s deferred management fee is 30%, which Pattison says is similar to the rest of the market.

Fletcher’s Vivid Living’s fee is 15% and Rymans’ is 20%, but the sector average is 30%, according to analysts.

An in-house executive chef oversees the restaurant, bar and room service dining at The Helier.

Some villages have adopted a model where they share a percentage of the capital gains with residents on sale, but the Helier does not have a similar model.

While the deferred management fee is clawed back when an ORA ends, residents at The Heliers have additional costs, which are mandatory.

A weekly tariff of $275 that is fixed for the term of the resident’s occupation covers rates, building insurance, repairs and maintenance, emergency call alarm response, and water fees.

Hospitality fees of $200 a week for an individual or $275 a week for a couple cover electricity, wi-fi, and a range of services including weekly cleaning, weekly wellness clinic check, and use of the car or chauffeur service.

The private care residences, which provide hospital-standard rest home and palliative care, work a bit differently.

Prices start from $400,000 for studios and from $500,000 for one bedroom apartments. There are then costs of $3395 per week or $485 per day.

Pattison says many of their residents have downsized from a large family home where they had to pay for insurance, rates, maintenance, and other costs.

Residents can use The Helier’s wine library for functions and meetings.

Under this model, they no longer have to cover those costs, he says.

“The costs of buying into a village buys them safety, convenience and ease as well, but it is a trade-off, and residents do think about that.”

But taken as a whole the costs are substantial, and beg the question of whether there is enough demand for luxury “later living” offerings in the current market.

Last week Ryman, which has the biggest share of the retirement market, posted a trading update to the NZX telling investors fewer sales would cut $35m to $45m off its expected underlying profit for the financial year to March 31.

Some people who intended to sell their homes to move into retirement villages are holding fire until the property market picks up and prices recover, it said.

Northbrook owner, Winton Land, also reported its revenue was down to $85.6m from $92.8m, and its profit after tax had fallen from $34.5m to just $9.7m in their first half year results on Tuesday.

Winton chief executive Chris Meehan pointed to the “current challenging economic environment and property market”.

The Helier’s amenities include an indoor swimming pool and spa, and a gym and wellness centre.

In the short term they are prepared for sales to remain slower, inflation to remain elevated, and continued pressure on borrowers, he said.

“However, we are focusing on buyer groups that are the least affected by these headwinds and are generally well-positioned to use current market conditions to our advantage.”

He also said one of the highlights of his year has been “the market reaction to our luxury later living proposition”.

Likewise, The Helier is catering to a specialist part of the retirement market. Oceania did extensive market research before starting the development, and is confident there is demand for the product, Pattison says.

To date, 20 apartments are in the process of being purchased, and four people have bought into the private care residences. He is “pleasantly surprised” with the uptake, which includes the pre-sale of the penthouse.

Oceania is planning more luxury villages like The Helier in future, but there will not be huge numbers of them and they will reflect the local community, he says.

“More generally, we have been transforming our portfolio, and moving into the premium end of the market over the last three to five years. It is an intentional transition.

“Over 25% of the population will be over 65 by 2030. With the ageing population, there is growing demand for this type of offering.”

In 2021, there were an estimated 48,736 retirement village residents, but the 75-plus population forecasts indicates there will be about 80,642 residents by 2033, according to research by commercial property firm JLL.