Understanding the Costs of Retirement Villages

For many older New Zealanders, a retirement village can offer a safe, social, and low-maintenance lifestyle. However, it’s important to understand exactly what you’re paying for before making such a significant financial decision.

Unlike buying a traditional home, moving into a retirement village usually means purchasing the right to live in a unit through an Occupation Right Agreement (ORA), rather than owning the property itself. This means the financial arrangements can be quite different from what many people expect.

More Than Just the Purchase Price

When comparing retirement villages, it’s important to look beyond the advertised entry price. There are often several costs to consider, including:

• An upfront payment to secure your home.
• Ongoing weekly or monthly village fees that help cover maintenance, insurance, gardens, shared facilities and village management.
• A Deferred Management Fee (DMF), sometimes called an exit or facilities fee, which is deducted when you permanently leave the village. In many villages this can be around 25-30% of your original entry payment.

What Happens When You Leave?

One of the biggest differences between retirement villages is what happens when you move out.

Some villages allow residents to share in any increase in the property’s value, while others retain all capital gains. Repayment timeframes can also vary, with some residents or their estates waiting until the unit has been re-licensed before receiving their money back. Proposed changes to retirement village legislation aim to improve repayment timeframes and provide greater protections for residents, but these reforms are not yet in effect.

Questions Worth Asking

Before signing any agreement, it’s worth asking:

• What do the weekly fees cover?
• Can those fees increase over time?
• How much is the Deferred Management Fee?
• Will I receive any share of future capital gains?
• How long does repayment usually take when I leave?
• Are there any additional legal, administration or refurbishment costs?

Understanding these details can help you compare villages more confidently and avoid unexpected surprises later.

Take Your Time

Choosing whether to move into a retirement village is both a lifestyle and financial decision. Visit several villages, ask plenty of questions, carefully read the disclosure documents, and seek independent legal advice before signing an Occupation Right Agreement.

Taking the time to understand the costs and conditions can help ensure you choose the option that best suits your needs, lifestyle and future plans.