By Nadine van Tonder
Choosing where you will live during your retirement years takes a lot of planning, much of which happens long before you actually reach retirement age. It requires that you make some important decisions about the lifestyle that you would like to live, location, ongoing costs, healthcare provision, proximity to family and amenities and so on.
One of the most important decisions is the form of property ownership you choose for your retirement – typically this varies between life rights and full ownership in a retirement lifestyle development.
“Your choice needs to be based on a well-considered retirement financial plan that looks at aspects such as affordability, investment returns, lifestyle, security and healthcare needs, among others. In this regard, understanding the difference between life rights and full ownership before you sign on the dotted line, is vitally important,” explains Gerrit Brandow, Director of Central Developments, which boasts a retirement portfolio of 12 developments, comprising over 5 000 units, all offering full ownership.
A life rights agreement means that you buy the right to occupy the property or unit for the rest of your life, but you never own it, nor can you bequeath it to anyone after you pass on. Since you can’t get a bond for a life-rights purchase, there will be no bond registration fees, nor any property transfer duties that come with full ownership of a property. You won’t, however, have any rights to how your living space is run, nor do you receive any capital growth returns for your financial investment.
With full ownership you own your property in the retirement development, as well as an undivided share in the common property (since it is in a sectional title scheme). You therefore reap the full benefits of the capital growth and you will be able to bequeath it to your loved ones.
Based on actual cases in Central Developments’ previous retirement estates, which do offer full ownership, investors can expect to see returns on investment of up to 20% per annum (up to 12% capital growth and 8% rental return) from year one, versus about 4% nominal growth in the residential property market. You can get a bond to finance the transaction and you have control over your property. If you’re buying now to retire later, you can let your property out to over 50s tenants. This gives you an opportunity to plan in advance for retirement and to buy at today’s prices, providing excellent investment returns in the process.
“It’s really important that buyers understand the distinct difference between life rights and full ownership and its impact on their capital investment. A life rights option can never be regarded as a property investment as there is no ownership of an asset that can grow in value. Neither the buyer, nor his/her estate or beneficiaries stand to benefit financially from a life rights transaction, so think carefully how you invest your money. Essentially a life rights buyer signs an agreement to pay a contribution which gives them the right to live in a unit for as long as they are alive, but that is where the value ends,” explains Charl van Niekerk, Marketing Manager at Celebration Retirement Estate.
Shortage of supply and high demand drives up value
Limited supply coupled with a very high demand, make full ownership retirement property in well managed lifestyle developments one of the best and least risky options for investors. But with only a few retirement developments allowing full ownership and investors of any age to buy into it, finding these investment gems is not that easy. When you do find a retirement development, like Celebration Retirement Estate in Northriding, which allows anyone of legal age to buy a unit and let it to tenants aged 50 years and older, this is one of the best residential property investments you can make.
“There is insatiable demand for secure, well managed retirement solutions offering full ownership and on-site frail-care and lifestyle facilities guaranteed to be operational from phase 1. Given the shortage and increasing demand for these properties, they are very attractive to investors who benefit from a strong yield on rental income and continued capital growth,” adds Charl.
When it comes to choosing the type of retirement property you want for your silver years which would yield the best return on your investment, ownership of a retirement lifestyle property provides exceptional returns, an exceptional lifestyle and a legacy that can be bequeathed to your loved ones.
By Nadine van Tonder