Living Well

AUSTRALIAN PROPERTY INSIGHTS

LIVING WELL

OPERATION & FINANCIALS

DEFERRED MANAGEMENT FEE: THE SECTOR’S FINANCIAL BACKBONE The DMF remains the backbone of most Australian Retirement Living financial models. It has remained dominant because it enables flexibility: residents can access a higher standard of housing and amenity without needing to draw heavily on savings or liquidate other assets immediately. Typically, the DMF accrues annually – often at 4–6% per year, capped at a maximum of 30–35% of the original or resale price. According to the 2023 Retirement Census: • 65% of operators reach their maximum DMF within 6 years

NEW CONTRACT MODELS REFLECT EVOLVING PREFERENCES Despite the dominance of DMF, there’s growing recognition that no single model fits all retirees. In response, many operators now offer multiple contract structures, tailored to residents’ financial preferences, household types, and estate planning goals. Common alternatives include: • Prepaid Plans: Residents pay more upfront, but little or no exit fee. This model appeals to those seeking certainty or higher estate returns. • Refundable Contributions: An elevated entry price with most of it refunded at exit – often used for assisted living units or care apartments. • Pay-As-You-Go (PAYG): A rental-style model where residents pay monthly fees for services and accommodation, common for those who want flexibility or have limited capital. Regardless of contract type, most residents also pay a regular service fee. These fees are governed by state legislation and operate on a cost-recovery basis – operators are not permitted to generate profit from them.

• 89% within 8 years • Almost all by year 10 • 95% of villages set their cap at 50% or lower

VALUATION RESILIENCE AND RELATIVE AFFORDABILITY

Unlike traditional housing, retirement units are not traded on the open market – they are re-leased or resold by the operator, often under a leasehold or licence structure. This makes Retirement Living less exposed to the volatility seen in freehold housing, and more aligned to resident turnover and DMF accrual. In 2024, the average price for a two-bedroom ILU was $651,000, or approximately 59% of the median house price in the same postcode. This affordability advantage supports the sector’s underlying demand proposition, and from an investor lens, offers protection during cyclical residential market downturns.

CUSHMAN & WAKEFIELD