On 11 January 2006 Alan Kohler gave his predictions for the investment market in his Eureka Report. Here are my picks for the three booms that have only just begun, he said, citing resources, Aged care/reverse mortgages and the internet.
Under Aged care/reverse mortgages he said:
My parents are moving into a retirement village owned by Primelife Corporation. It is a wonderful place and hugely profitable for Primelife. After they bought a 49 year lease on a unit for $260,000; the company takes a monthly fee, plus a deferred fee of 25% of the original purchase price when the lease is onsold, plus 75% of any capital gain. Primelife is expanding rapidly and demand is strong. I have personally invested in FKP Property Group because of the quality of its management and the spread of its businesses.
These sort of retirement villages are part of a big trend that has only just begun: the spending by retired people of their children's inheritances. I don't mind my parents going into a deferred arrangement with Primelife Corporation because I want them to be happy and comfortable in their old age, and I know they will be. All of their friends are going into the same or similar villages. I'm sure most children in my position would feel the same. By buying shares in these type of companies, you are investing in the companies that will collect the money when our parents move into a nursing home or pass away.
And then there is health care, which will grow as more and more people move into the older age bracket.
Then in his 2011 book, Guide to personal investing, his full guidance on retirement villages was:
Retirement villages
These cater for people who wish to live independently. Units are priced anywhere from $200,000 to more than $2 million, with most available under a loan and licence structure.
Say you want to move into a $500,000 retirement villa. Under the loan and licence structure, you lend $500,000 to the village developer in return for a licence to occupy the unit, but there is no transfer of ownership. You then pay a weekly service fee until you die or leave the unit, when the balance of the loan is repaid to you or your estate after deduction of a deferred management fee. This fee covers maintenance and other operating costs and is generally set at 20 to 40% of the then market value of the unit.
When choosing a retirement village, think about whether you want a continuum of care on site or just a lifestyle move. Retirement villages and residential aged care operate under different legislation and financial models, so moving from one to the other can involve complex financial arrangements.
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