Retirement village industry shake-up on the cards

Outgoing Summerset Group boss Norah Barlow has considerable achievements in business. Photo / Chris Gorman

Retirement village operators will fail, more law changes are on the cards and businesses in the sector will undergo more acquisitions and mergers, says Norah Barlow.

The ex-chief executive of NZX listed Summerset Group who remains a director has this morning opened the Retirement Villages Association conference in Auckland, predicting a huge industry shakeup over the next 25 to 30 years - including baby boomers making more demands and even a challenge to operators taking 25 to 30 per cent of elderly people's money and keeping it when they buy an apartment or unit in New Zealand villages.

"Consumers will be more demanding. I ask myself, what would I be like? The older baby boomers are now 66 to 67 and they will change the way we think," she said.

Financial analysts are continually questioning whether operators can continue to keep that 25 to 30 per cent of purchase price, she said.

"It's a very good model for getting people into a home with add-on services without paying for them but will it survive with the next generation when they're losing money and what will we do about that?" Barlow asked.

Barlow encouraged the sector to ensure the existing model where operators keep that 25 to 30 per cent was "seen positively. Will the financial model change?"

She is also concerned about new tighter laws: "There will be greater public exposure and we will be under more scrutiny and legislation may change the future. The RVA needs to be very watchful. You don't want that. Look across the Tasman to see how things can change relatively quickly.

"More owner/operators will exist in the near future. Probably, we'll see some financial failures of operators. We won't see the village fail but some of the operators will because of the hype around the growth. Lots of people are building villages. There will be casualties."

However she also cited backing by major banks and said the sector enjoyed that support.
She cited technological advances, smaller families, the changing role of women and the growing Polynesian, Asian and Maori populations and asked what impact those factors would have.

"There will be a lot more people who do not own their own home so how will that change things? Will the sector cope with rentals?" she asked, referring to elderly people being tenants in villages rather than owners of licenses to occupy.

"will there be cures for dementia? What will happen with joint replacements because these are getting better. Will we be part of Australia? We have increased desirability and numbers. We can see this happening right in front of our eyes," she said referring to major industry players buying land and building more villages.

Yet only three retirement village operators out of 50 in the sector were listed on the NZX.
She predicted more listings and said New Zealand was unusual in having that number of stock exchange businesses in the sector.