Retirement villages in New Zealand can take more than two decades to become profitable, according to a new study from auditor and advisory firm Grant Thornton.
The report, The Path to Profitability, found the average retirement village reaches breakeven after 21 to 25 years, depending on location and development type. A rural villa-style village typically takes 21 years to turn a profit, while an urban apartment-style development may take 25 years or more.
The study spans the full development cycle, from land acquisition and construction through to project completion and long-term operations. It reveals that most retirement village operators across the Tasman are running on razor-thin margins.
"That isn't to say these villages are making an operating loss for two decades," Grant Thornton NZ Retirement Village, Aged Care Sector and Healthcare lead Pam Newlove said.
The report shows early-stage cashflows are strong – largely from unit sales and entry contributions – but operational and refurbishment costs begin to erode those margins once residents have been in place for around 7.5 to 10 years.
While weekly fee income typically covered operating expenses, some operators reported losses of up to 20%.
"General feedback during our research was that many operators are struggling to cover operating expenses in the current economic environment," she said, adding it was important to understand the stresses facing the sector, given the service they deliver to an ageing population.
