A crown organisation is out to raise awareness about the financial, personal and legal impact of buying into a retirement villages.
Troy Churton, retirement villages national manager at the Commission for Financial Capability, said people needed better information before committing.
More than 32,000 New Zealanders are now living in retirement villages, a rapidly expanding sector.
Churton said people needed to know what they were actually purchasing when they bought a place in a village.
"The commission is working hard to raise awareness about the financial implications of common licence to occupy models of occupation right agreement," he said.
A revised downloadable booklet, Thinking of Living in a Retirement Village was due to be ready by the end of next month. A series of seminars was also being held to inform people bout the sector.
"We focus on these financial implications in our public events. We should have more web accessible tools over the next months to help explain the different effects of deferred management fees, including an example of a village where a capital gain, if any, is possible," he said.
Churton said he knew of at least one village which offered residents a gain but it was held in a trust and residents needed to live there for some years before they were entitled to the increase on the value of their unit, not the underlying land.
"But it is there - unlike most other villages," he said.
Information was already available to those considering the move.
People who want to leave a capital appreciating legacy to their descendants will want to consider other types of housing investment.
SHARE THIS QUOTE:
"Every intending resident receives independent legal advice on the disclosure documentation for their chosen village before signing an occupation right agreement. The standard deferred management fee (DMF) range is between 20 per cent to 30 per cent," he said of the amount village residents lose from their original purchase price.
"We expect the effect of a deferred management fee on their capital would be an important thing an advisor would explain. A DMF applies in whatever inflationary or deflationary housing market environment there is," Churton said.
"An underlying presumption of the DMF model is it enables retired people to release equity , mostly from their homes, to live now and pay later for the village lifestyle and amenity they enjoy. It also presumes the move to the village is likely their last residential housing type of move. People who want to leave a capital appreciating legacy to their descendants will want to consider other types of housing investment," Churton said.
"The average residential tenure in a village was around seven years. Twelve per cent of the 75+ cohort have chosen retirement village living and there are some statistics suggesting the great majority have been happy with their decision.
For seminars for those considering retirement villages, register by calling 0800 268269 or visit www.cffc.org.nz. Next seminar is 10am on April 28 at the Auckland Bridge Club. Registrations necessary.