‘Baby Boomer’ generation look for downsizing alternatives
A “baby boomer bottleneck” of demographic change was set to drive a wave of downsizing among older Australians, and Land Lease Communities (LLCs) were presenting as an increasingly attractive alternative.
This is the view of Luke Chadwick, the director of Chadwick Property Valuers, who believes the emerging LLC sector would see another 80,000 homes constructed over the next 15 years, doubling the current supply.
Speaking at a Land Lease Communities Summit held by industry group The Urban Developer in September, Luke said that although LLCs were introduced in South-East Queensland around 20 years ago it was only recently that the idea had gained momentum, with 33% growth in the last two years.
“There’s 3.3 million people moving into the 50 to 84 year bracket by 2041,” said Luke.
“That will take it to 11.7 million people, or around 35% of the population so that is a huge demand side equation that needs to be satisfied.”
In response to the changing demographics, Stockland has sold its traditional retirement home portfolio and, with the 2021 purchase of Halcyon, is now committed to the LLC sector as its retirement strategy.
Nick McGrath, Executive General Manager Funds Management at Stockland, said the sector now represented ~8% of funds employed on the balance sheet, “and we’re looking to increase that exposure.”
“LLCs are one of our highest conviction investments from a Stockland point of view,” said Nick. “It has really stable cash flows, a growing market and there is a severe need for diversity in housing for seniors in Australia."
Luke Chadwick pointed to the growth in national median house prices and the fact that LLCs – where people buy the house but not the land – were generally cheaper to buy in to than traditional residential purchases.
With median house prices around Australia now generally over $800,000 there was often a downsizing dividend of around $200,000 to $300,000 on offer for people buying into LLC communities.
Luke used the example of a “typical owner of a house and land in the suburbs” whose family members had all moved out.
“They are looking at their alternatives, they’re watching their equity growth through median house prices and weighing up what they can do,” he said.
“Maybe they want a change of scenery, a change of climate. Maybe they want to move closer to their kids.”
Luke also presented data showing how the increase in demand for LLCs was tracking with the increasing registration of caravans.
This spoke, he said, to the attractiveness of “lock up and leave” options for retirees who liked to travel, but also wanted to maintain a home base.
“There’s flexibility in just being able to close the door, go back for a week at a time or whatever, and know you are going back to a home just as you left it,” he said.
From fund manager and developer Greenfort Capital, founding partner Adam Vaggelas told the event that investors were highly aware of the “housing supply and demand disconnect” in the market and how this was driving LLC growth.
“Housing affordability is a constraint and the macro fundamentals for Australia are very interesting,” said Adam.
Housing sector investors had historically allocated capital into retirement villages and disability and student housing, but were now understanding the opportunities in the LLC sector.
Institutional investors, he said, were looking to diversify into “more living sector exposure” and LLCs were starting to scale, giving investors “some confidence around the exit liquidity.”
“We have great conviction in the sector,” said Adam.
Further information
Listen to the on-demand recording of the Land Lease Communities Summit event here.