In 2021 the retirement village sector increased prices by approximately 4% against the backdrop of residential pricing across the country increasing by 22%. Does this make sense to you?
Tomorrow is 1 June and if you haven’t implemented new and higher pricing for your retirement village homes for FY23 you are delivering a disservice to both yourself as an operator and to your village residents.
Enquiry up
The operators that are energetic with their business are reporting substantial increase in enquiry and an increase in quality. For instance, Mark Binden (CEO of Oak Tree) tells us that his year-on-year enquiry rate is 82% up.
In our stories today we report one billion-dollar interest in village operators that could generate no interest from potential buyers as recently as 12 months ago. The analysts recognise that there is significantly higher returns to be achieved out of village businesses because demand far exceeds supply.
In the chart above we expose the traffic on villages.com.au for the first five months of this year. 398,000 people searched for a retirement village. With a finite stock of just 23,000 village homes to sell across 12 months, this equates to 9,600 village homes available to sell compared to the 398,000 people searching in the five months.
Quality up
The number of people searching has been relatively steady, but the engagement on villages.com.au by people sending email enquiry, requesting phone numbers and clicking through to websites is significantly up.
Good for residents
What does this mean? Now is the time to be reviewing prices upwards with confidence.
While the operator will make more profits, residents will directly benefit because operators will be more prepared to reinvest in their villages and their customer experience. This in turn will generate better local word-of-mouth positive promotion, and more demand.
If you doubt that operators are being reticent to increase prices check this segment from the Retirement Living Council sponsored survey.
Counterintuitive
On a final note, a number of operators have highlighted to us that low village home prices acts as a brake on sales because customers perceive it as being too great a trade down from say a $1 million home to a $500,000 home.
It all goes to confidence. And we have 30 days to the beginning of the new financial year.
