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Home Renovation or Retirement Village?
If you’ve recently retired, you may have started looking at housing options. You may be considering renovating the home that you’ve lived in for years, or you may be considering the retirement village option. When planning, consider your financial situation, desired lifestyle and plans for the future.
Most retirement villages in New Zealand operate under occupation right agreements (ORA). An ORA means you don’t own the house you’re living in, just the right to occupy it. In most cases you, or your heirs, will not be entitled to capital gains of the property.
Additionally, the price of purchase generally includes a membership or amenities fee. This is often 25 to 30 per cent of the purchase price and will be deducted from the amount you get back when you leave.
This can seem like a bad deal, especially when renovating your own home is likely to increase the value of an asset that you own. However, depending on where you live, it’s possible to over-capitalise during a renovation. This is especially true if you have to make accommodations for health equipment such as walkers or wheelchairs. If you can’t recoup the amount spent, it may not be a great investment.
Keep in mind that in your own home, you also have to pay for maintenance. A retirement village usually includes a weekly fee to cover upkeep, but with many residents putting into the pool, costs can be kept down. And if you're starting to lose mobility, you may have to pay more for maintenance in your own home than in years past.
There are retirement villages that don’t use ORAs. It’s possible to find villages that allow you to purchase outright, giving you the opportunity to downsize, have maintenance done for you and keep your own capital gains.
The biggest consideration in your retirement housing decision is the type of lifestyle you want. One in five elderly New Zealanders are lonely, a problem that can be exacerbated by staying in their own home. If you have strong ties to the community, an active social life or prefer being alone, this may not be a consideration. If you lost a lot of your social circle when you finished work, a retirement village comes with a built-in community that may be a great benefit. Most retirement villages offer fitness and social activities where you can interact with other residents.
Living in a property where the maintenance is taken care of also allows you more time to explore your own passions, whether that’s gardening, dancing or golf. A lot of villages have lessons, groups, gyms and other facilities, so you have easy access to the resources you need to enjoy your retirement. Yes, you’ll have to research to find a village that meets your needs, but it’s possible to find most, if not all, of the facilities you’re looking for in the one village.
The final point in favour of the retirement village is in forward planning. Even if you’re happy in your current community and renovate your house to your satisfaction, there’s a strong possibility that you might need a higher level of care at some point in the future.
In your own home, there are the options of visiting nurses, on-site nursing or even a relative becoming a full-time caregiver. These can be expensive solutions and it may be that you don’t have a relative who is in the position to care for you.
On the other hand, most new retirement villages are being built with aged care facilities on the grounds. This lets you have continuity of care, staying in the same community with familiar surroundings and people, even as you move to a higher-care facility.
Although renovating your home can be a good option, there are benefits to retirement village living. If you decide on a retirement village, remember to research your options and get financial advice if you’re signing an ORA. In the end, you should pick the option that lets you most enjoy your retirement.