Read this carefully before buying a home

BY BONNY FOURIE bronwyn.fourie@inl.co.za

Experts advise those who wish to retire or semi-retire on what to keep front of mind, and explain the various ownership options available

TODAY’S retirees are remaining active until well into their golden years and, as such, are demanding more from retirement accommodation.

Health-care offerings that suit independent residents through to those in frail care, as well as lifestyle and sporting facilities, are therefore among the priorities for retirement property developers. Such accommodation in the coastal areas of the Western Cape and KZN are particularly sought after.

For those wishing to retire, or more often semi-retire, Jonathan Acutt, the managing director of Acutts Real Estate, says the idea of moving to the coast as a lifestyle choice has become more predominant, especially as younger families seek opportunities overseas.

Acutt says there are three major considerations for those looking to semigrate to the coast:

1. Safety

“Safety and security are high on the priority list. This is why community scheme living, especially for retirees or semiretirees, is becoming more popular. These come with safety features such as 24-hour security, perimeter fencing, CCTV cameras, and access control for complete peace of mind.”

2. Social activities

Further to this, Acutt says there needs to be a strong focus on social activities and interactions with neighbours and communities. The social distancing during the pandemic highlighted the value of social interaction and community engagements.

“That’s why it’s worth considering the availability of a community centre and social or sporting activities such as game nights, organised hikes, environmental groups, and markets. Estates that emphasise sustainable communities, where the communities are putting more in than they’re taking out, is important.”

3. Self-sustainability and sustainability

In a world where the supply of basic services, such as electricity and water, is an issue, he also sees a great emphasis on communities that are sustainable and self-providing.

“Retirees should look for elements like solar power, water storage and designs that maximise natural lighting and breezes. Beyond this, sustainable living, in itself, is a must. Living within a natural environment, supporting the natural environment, is a simply a better, healthier way to live.”

Echoing this, Reece Daniel, the developer of Serenity Hills in Margate, says people are looking for retirement homes where they can enjoy active, outdoor lifestyles. This has negated a need for priority shifts.

In addition to the above, Serenity Hills offers guidelines for those starting the hunt for a retirement home:

✦ Natural spaces.

✦ Pet-friendly accommodation.

✦ Value for money.

✦ Health care.

✦ Children’s facilities.

✦ Community.

For many retirees, however, the idea of moving into a retirement village can be daunting, especially if they would rather not label themselves as in need of specialised elderly living. Weighing up the pros and cons is personal, and circumstances vary from person to person, experts say.

You might, for example, be a single older person with no children, married and with adult children who have left the nest, married, looking after grandchildren or supporting your adult children.

Whatever the case, many people get to a point where they’re quietly thinking about whether they should, or could, move into a retirement village. And one of the most important things to wrap their heads around is the sort of property contract they should enter into.

There are three possibilities offered in retirement villages – life rights, freehold and sectional title.

Life rights essentially means that once you pass away and your unit is resold, your estate gets back the amount you paid for the property, minus some costs, but not any profit made on the sale.

However, it does come with benefits.

Furthermore, most retirement complexes no longer offer outright ownership, says Jason Appel, the financial planner at Chartered Wealth Solutions.

“Internationally, it’s mostly life rights, but we’re still getting used to it here.”

Life rights options are more budget friendly than ownership. Levies also cover care of the garden, a swimming pool – if there is one – and all communal areas.

In the example he looked at for his parents, Appel says buying a life rights property was R500 000 less than buying it outright.

“The saving of R500 000 on capital outlay should, of course, be invested.”

If the extra income is not needed monthly, it will compound in the investment portfolio.

He adds that the saving on monthly levies/rates and taxes would, of course, also result in needing less monthly income out of your investments.

“A reduction in expense of R3 000 a month would add five to six years to the longevity of the client’s assets. The best way to improve the longevity of a retired person’s plan is to reduce their expenses, and a little goes a long way.”

If you go for life rights, you forgo the capital appreciation in the property’s value.

“This growth is hard to estimate as residential property valuations vary quite drastically. I would suggest that people consult their financial planners before making the decision.”

One of the main benefits of life rights, he explains, is that if you live to a really old age, and you run out of money, the village will not throw you out. Rather, the cost of your continued care is deducted from the capital amount you paid upfront.

Appel says people sometimes avoid life rights because the feeling is that their heirs will lose out on the initial investment.

However, personally, he would rather know his parents were being well cared for and there was no risk of him having to put in extra money down the line.

“It really helps me knowing that’s taken care of.”

From a purely numbers point of view, it’s better to invest in a retirement village earlier rather than later.

“A person buying in at age 50 or 72 gets the same value over time, so the younger person will ultimately get a better deal. However, most people are not ready to even talk about it in their fifties.”

An added consideration though, is that most places have a waiting list.

The other two contracts explained:

✦ Freehold

Rob Jones, the managing director of Shire Retirement Properties, says the option means you own the land and building. It is your responsibility and you pay rates and taxes as there is a registered title deed in your name.

“You can leave it to your heirs and any gains in value would be for you. There may be some exit levy to pay to the complex, but it differs from place to place.”

✦ Sectional title

Here, you own a portion of the building, for example, an apartment or townhouse.

“You will have a title deed and you can leave it to your estate. You are responsible for internal maintenance, while the body corporate takes responsibility for outside maintenance as a general rule. You pay for that in your levies, of course.

“There may be some exit levy to pay to the complex, but it differs from place to place,” Jones says.

Options for a retirement property purchase include outright ownership or life rights. PICTURE: A KOOLSHOOTER/PEXELS