Many retirement villages now offer prospective residents and their families several contracts to enter the community, which is welcome.
However, the much-maligned Deferred Management Fee (DMF) is back in vogue, says Tony Massaro, the PwC Partner, who is behind the Retirement Living Council Census.
The Deferred Management Fee helps pay for all the facilities in a village that everyone uses, such as community halls, bowling greens and swimming pools. The DMF is calculated as a percentage of the sale price multiplied by the number of years that a resident lives in the village.
Tony said the data over the last six years reveals that the maximum DMF is reducing, along with the number of years the maximum DMF is calculated on.
72% of village operators in 2021 used six years or less for the deferred payment of the DMF, whereas it was 49% two years earlier.
In 2019, the maximum fee level typically ranged between 25% and 36% of your home value. The 2021 Census showed it is now lower than 36% for 93% of villages.
Tony told the Retirement Living Council Conference that over the past six years, the payment structure of residents paying an “ingoing contribution with no capital gain at exit” has also increased from 41% in 2018 to 55% of providers surveyed in 2021.
This perhaps indicates residents are seeking greater security. They have the absolute certainty of not having to bear any capital loss or any capital gain. They know from the start, what they are paying and what they will receive.