The transition of village communities from a charitable base to a business base, coupled with existing demand requiring a minimum of $1 billion new investment every year, means both business and government are getting involved in the industry. Who are the major players and what is the New South Wales Government doing?

What does it mean for you?
Charitable groups still dominate, accounting for 80 percent of communities in New South Wales. Private villages make up less than 100 of the state's 550, and they range in size from small to large. But this is going to change, and rapidly.

Three Forces of Change
Over the next 10 years, the village industry will change dramatically, with the industry moving to a big business footing. This may affect you if you are considering this life-track and should be factored into your assessment of what is best for you. There are three forces of change.

Charitable villages are beginning to strongly resemble their for-profit counterparts, both in their corporate structure and community quality. Not-for-profits are building ‘resort grade' villages with luxury facilities, Caesar-stone kitchens and European appliances - and happily charging full market value. They need to earn top money to rebuild existing villages to the level the market expects, plus they have to afford the cost of acquiring land and building new village communities. They have to make a profit - or ‘surplus' - if they are to survive and compete.

Traditionally, the developers of private village communities have been small businesses who built small communities - typically 20 to 50 dwellings - which they had to sell quickly to earn their money back. They too are being squeezed by resident expectations of bigger and better facilities, which in turn means they need to have bigger villages to subsidise the infrastructure costs. Small developers have had to find big, strong financiers to back them.

Banks and big investors are recognising that new retirees have real wealth thanks to the ballooning value of their family home and 15 years of strong economic growth - fed to retirees via the share market and superannuation. By investing in village communities, the banks and big investors secure both real estate assets made more valuable by restrictive zoning, plus guaranteed income streams. This is the perfect, conservative investment environment.

Why are Banks Buying Villages?

Banks and investment trusts are aggressively buying private and not-for-profit villages at very high prices. They are doing this for two reasons. The first is that land is scarce - to find a good site, buy it, get planning approval and build it takes five to seven years and considerable uncertainty / risk. It is therefore easier to just buy an existing village, where everything is known and complete. The second reason is the income is predictable; they know what fees they can charge 10 years ahead. This allows them to offer investors via an investment trust close to guaranteed returns. By pooling a large number of villages - most target 3,500 units - into an investment trust they seek to offer a return of nine percent plus, after fees.

Governments and Land Availibity

Historically, villages have been built within or near areas with a high concentration of retirees. That way, when a move was required, retirees didn't have to go far. The advent of resident-funded villages, however, meant villages were constructed where people were retiring to, resulting in the high numbers of village communities in coastal regions. With more than 30,000 plus new village units needed nationally over the next 25 years so as to cater to Australia's ageing population, where are all these new units going to be located? This is a significant problem.

Despite Australia being so big, there is surprisingly little space for medium-density housing of the type most common in village communities. Many popular retirement destinations on the coast, such as Newcastle, already have a number of village communities and can't build any more due to zoning restrictions. Likewise, residents of Sydney's north shore are keen to retire in the local area but can't because of a lack of space.

New Government Freeze

The lack of available land has also become acute in regional areas. This has been further compounded by a moratorium or a freeze on all planned village communities placed by the New South Wales Department of Planning in early 2006. At the time of printing, no new development applications would be considered for regional areas.

According to the Department, the moratorium was placed after a "flurry of ill-conceived and speculative proposals around rural townships." Concern has been expressed by the New South Wales Government that, in the rush to build new retirement accommodation, some new developments may fall short of the Retirement Villages Act. Some villages, for instance, may not be close to shops or medical facilities. Planning policy for village communities is set to be reviewed, a process which may take as long as a year. Critics claim politicians may be wary of changing the voter mix in a regional town.

If too many conservative retirees move into a small electoral area, it may affect the voter support of an incumbent. Meanwhile, waiting lists for villages are growing longer.

Waiting Lists

Waiting lists are very common in the village community industry, particularly for charitable and church villages. The South-West Italo-Australian Association, for example, caters only to the Italian community and has a waiting list 20 years long!

That being said, most villages have short waiting lists and some have vacancies. To be placed on a waiting list, a fully refundable fee is required that by law cannot exceed $200. Under the NSW Retirement Villages Act, you are free to take your name off a waiting list any time you wish.