Over the next 25 years New Zealand’s overall population is projected to increase by 20 per cent, or roughly one million people. The proportion of those aged over 75, however, is set increase by 164 per cent over the same time period. This has huge implications for the retirement village industry due to the demand that will be created for new accommodation units. Our latest research paper on New Zealand’s ageing population shows its impact on the real estate market

With this level of growth of the ageing population, we estimate there is sufficient demand for more than 1,600 additional units per year for the next 25 years. At present we are seeing a bulge in the development pipeline, which consists of over 15,000 accommodation units that are either in the planning or construction phases.

This equates to around nine years of supply based on current demand projections, with 44 per cent of new supply being located in the Auckland region alone. More than half of this new development is being driven by the five largest operators (Ryman, Metlifecare, Summerset, Bupa and Oceania).

A popular option for retirees

Retirement village living is growing in popularity in New Zealand. The current penetration rate (percentage of population in a retirement village) for those aged 75 years and over sits at 12.4 per cent. Penetration has increased every year since we started surveying the market back in 2012.

There are a number of reasons for this increase but primarily it’s due to the improvement in the variety and quality of product now being offered. Village operators have picked up on these trends and in planned developments are considering providing facilities that service both village occupants and the wider community. This would act as a way of diversifying their income stream during periods of low unit sales. A second contributing factor is the increased prevalence of couples moving into a unit together.

As the sector grows in New Zealand it is having a number of positive flow-on effects for the wider economy. The sector creates jobs not only for those working in construction of the villages, but also for the care staff who work in the finished villages. Because the sector is privately funded it also mitigates some of the substantial healthcare costs which are borne by the government. People who live in a retirement village often enter aged care later, have less frequent and shorter hospital stays, fewer doctors’ visits and have overall improved social and mental wellbeing in their later years.

With the performance of the sector improving year-on-year and with strong growth prospects on the horizon, we are starting to see international investors looking to purchase retirement village assets. While transactions are uncommon at this point, we see the sector becomingly an increasingly important asset class as our population ages.

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