DMF dying? 30% of Levande’s residents pay upfront
Levande's contracts see demand shift to upfront payments
- New pricing: Upfront fee lifted to 22%, deferred fee to 35%
- Clear trade-off: Pay more upfront or forgo value on exit
- Consumer shift: ~30% of buyers opting to prepay
- Market trend: Flexible contract options now standard across operators
Retirement village operator Levande has revealed that more of its residents are paying upfront to enter its communities.
The operator had launched a new contract and payment offer for entry into its villages in July 2024.
Levande introduced two payment options:
- Pay 20% of the purchase price upfront.
- Pay 30% of the fee when you leave.
It has changed the percentages slightly to:
- Pay 22% of the purchase price upfront.
- Pay 35% of the fee when you leave.
If the apartment price is $1 million, the Upfront buyer will pay a 22% higher price on entry or $1.22 million, and receive $1 million when they depart.
The Pay Later buyer will pay $1 million on entry and receive 35% less when they depart, or $670,000.
The difference, or discount, is $330,000 in this example.
Levande CEO Kevin McCoy said Baby Boomers, the wealthiest generation Australia has seen, have been the biggest influencers of retirement living.
“It’s influencing locations. It’s influencing contract types. It’s influencing products, it’s influencing the design of the built form,” he said.
“Typically, this industry ran on a fee which was deferred. Now we’re finding 30% of our consumers are looking to pay that fee upfront.”
Aveo was the first, in 2021, to introduce a choice of contract options: Now, Later, Bond. At the time, new CEO Tony Randello said he was aware that the clientele wanted a choice in contracts.
In an exclusive interview in DCM Group’s SATURDAY magazine in February this year, Tony said 35% of its customers choose Now or Bond.
Keyton, the third major retirement village operator, also says that around 30% of its clients have prepaid (upfront) or were on a bond.
The operator offers four contracts: Prepaid, Refundable Contribution, Deferred Management Fee and Pay-As-You-Go (limited).
