Summerset boss Julian Cook says people aren't buying in the Hobsonville village, above, just for financial reasons.
Summerset boss Julian Cook says people aren't buying in the Hobsonville village, above, just for financial reasons.
Retirement village residents who buy into a huge new Hobsonville waterfront village will lose 25 per cent of their purchase price when they sell their places after five years.
But Summerset Group chief executive Julian Cook says people buying into the new $120 million Summerset at Monterey Park are notmoving purely for financial reasons.
They were picking a lifestyle, moving to a piece of land surrounded by water on three sides and a new village with a bowling green, swimming pool, village centre and many other amenities and where they could fish and sail.
Places on the site 20 minutes' drive from Auckland's CBD are selling from $449,000 to $1.25 million.
About 400 people would live in 125 villas and townhouses, 72 apartments, 50 care apartments and 52 beds in a resthome when work is finished in 2018, he said.
More than 100 people already live on the site, still being developed at 1 Squadron Dr, across the motorway from Hobsonville Point on the city's northwestern outskirts.
Cook acknowledged that Auckland residential prices were rising rapidly and Summerset was likely to re-sell Monterey Park units at amounts well in excess of the original purchase price.
"Valuations [at retirement villages] tend to follow what's happening in the residential market, so it could be 15 per cent," Cook said of price rises.
Asked if it was fair to take 25 per cent, Cook said: "[Value] increases are not always 15 per cent. Sometimes it's more and sometimes it's less. What the model lets us do is put more facilities on site such as swimming pools and care centres, which we wouldn't be able to do if we didn't have that model. We have to make a return on investment."
Julian Cook.
Without the deferred management fee system, buyers would need to be charged more for units, he said.
"If we were a one-off developer and there was no income stream, we would need to charge more upfront. We need to make a return on our investment."
Under the deferred management fee system, all the major listed retirement village businesses repay only a portion of the original purchase price once the resident sells, usually either following the resident's move to the on-site nursing home or death. Buyers can lose 20 to 30 per cent of their original purchase price.
Yet Auckland residential price rises have been in the 14 per cent region lately, making retirement villages bad property investments on re-sale.
One Tauranga resident said an $800,000 retirement village unit purchase resulted in a payout $150,000 less after only three years, yet the operator resold the unit for $1.2 million. So the resident had effectively lost $550,000.
Rob Wilson, the Auckland-based president of the Retirement Village Residents Association, says the existing system results in village owners getting all the upside and residents all the downside.
"Operators don't pay out any capital gain when they resell. But residents are liable for any capital loss.
"So when the market's on the rise, that's okay but when the balloon busts, the residents have to take the loss. That's unfair," Wilson said.
"We doubled in size in the last five years and we expect to double again in the next five to six years," he said, referring to Summerset's market capitalisation of $950 million which he said could stand at $1.8 billion by 2020, if the share price reflected the company's growth.
At Mt Wellington, Summerset is building a $150 to $200 million project in Harrison Rd and at Parnell alongside the railway line, it has a similar sized project planned.
