McCrindle Baynes latest research results supports significant growth in village penetration – and doubling penetration in 10 years will deliver $4.2B development profit per year

The results from our November McCrindle Baynes village survey covering residents from over 200 villages are now being analysed.

Asked would you make the same decision to move into a village again, just 4% said they would not make the same decision to move into a village – meaning 96% would move into a village if they have their time over again. A remarkable statistic; different and better intelligence to the traditional ‘satisfaction’ question.

So what does this mean for the sector looking forward. We have done some homework.

Referring to the Retirement Living Council ‘Profile on Retirement Village Operators’ fact sheet, it details that in 2013 there are 2,160 villages across Australia offering 112,296 independent living units housing more than 177,000 residents.

Again our McCrindle Baynes survey result shows 85% of residents are aged 70+ or 150,000 residents. There are 2.2 million Australians in this age group. Therefore villages have a 7.5% penetration rate in this age group.

Given the financial necessity of future ageing Australians to release equity in the family home to downsize and also control their budget outgoings, village operators can expect these to be substantial drivers over and above satisfaction levels, increasing village demand.

The Retirement Living Council fact sheet details that just 148 ILUs were built in 2012 but approximately 350 will be built in 2013. (Click HERE for link to RLC fact sheets).

http://www.propertyoz.com.au/Article/NewsDetail.aspx?p=16&id=8605

We created the chart above to demonstrate the size of the development market here if the sector simply doubles the stock of ILUs in the market – meaning we grow the existing stock of 112,296 ILUs by an additional 114,283 ILUs. (This will require a compound growth of 65% each year for 10 years – sounds big but in the 10th year we would simply moving from 7.5% penetration to about 10%).

Note that after five years, with a 19% development profit the sector can generate $306 million revenue on sales of $1.6B based on a sale price of just $441,000.

By Year 10 the development profit is $4.2B. This is significant in itself but at the same time will be providing affordable housing for ageing Australians with no government subsidy. Additionally consider the freeing up of the stock of family homes, the renovation market this will generate and the new village construction. It has to be a good news story.

Is it possible? The research results coming in say ‘yes’.