The phones and emails have exploded on the just-released (and confidential) draft policy on buybacks the WA Government’s Consumer Protection Unit wants to get passed by Cabinet before Christmas.
Fast tracking 12-month buybacks
We haven’t seen it (it’s confidential), but many are telling us the recommendations to go to the Minister and Cabinet are:
- 12-month buybacks for all operators (metropolitan and regional)
- Commencing 12 months after legislation is passed
- Retrospective – i.e. applies to all departed residents, not just those after the 12 months introduction
- Applies to all contracts including strata
- The ‘aged care rule’ will apply – operators pay the DAP for residents entering aged care
- After a three-year trial, buybacks will be moved to six months and operators will need to offer to pay RADs
The alarm and consternation we are hearing points to the fact that village homes in WA sell slower than other states – which have 18-month buybacks as a general rule.
In fact, the PwC /Property Council Census just released points to the fact that WA has the lowest occupancy in the country at 84%, a drop from 89% last year. The national average for vacancy to sale is 261 days. WA is likely to be significantly higher.
Have village operators got the capital?
The figures are alarming. One bank is saying the number of homes that could fall across the 12-month line could be 1,000. If they need to be paid out in say 15 months’ time, it will require $450 million which the banking sector may not be prepared to provide.
The WA sector has not been strong since 2014 when the housing market came off the mining boom peak. Operators don’t have large reserves of capital.
The reality is that the residents may be the losers in this. Villages need reinvestment to keep them current and fresh. Buybacks soak up that capital. In fact, it is a self-fulfilling circle. Less capital, less reinvestment in the village, less attractive to new buyers, slower sales, forced buybacks. Repeat.
Indignation and urgency
The challenge is that many WA operators are not really aware of the changes and implications.
ACSA, LASA and the Retirement Living Council (RLC) have been in the scoping meetings since September but the draft policy was only released a week ago, and responses were required by yesterday.
Consumer Protection is proposing this timing process:
- get recommendations to the Minister ASAP for approval (next week or so)
- on approval, have them tabled in Cabinet before Christmas (next three weeks)
- draft legislation in the ‘caretaker’ period before the March election
For operators, this will be ‘game over’.
Operators need to act now
While there is merit to each side of the discussion, the haste and obvious economic consequences, including for residents, is great. So why the rush?
Operators are being urged by the peaks to get up to speed and act fast. It’s a matter of days is the message.
The Retirement Living Council is distributing the facts for operators. You can email them HERE for a fact sheet.