National shortages fortifies retirement investment

CAPE TOWN (November 13) - The days of retirement property investment offering diminishing or no capital appreciation are over, according to retirement consultant, Russell Masters, who notes in a media release, that in recent years this form of ownership has become increasingly desirable due to national shortages.

During the past 15 years Masters has noted this investment shift while overseeing h Cape-based retirement developments such as Woodside Retirement Village, Oude Westhof Village, Peers Village and the newly-launched Schonenberg Retirement Village in Somerset West.

According to Masters, the key for future owners is to start investing early before its too late - due to national retirement property shortages. “Many of my clients start looking into retirement investment at least 10 years earlier than they plan to retire. This is recommended as waiting lists can be up to 15 years long.”

Masters, who is currently marketing the Schonenberg Retirement Village, notes that there is also a trend among higher income brackets to retire early - with couples in their fifties or sixties looking to invest for immediate occupation. “The emerging upper middle class in South Africa is also increasing the number of retirees that can afford premium retirement accommodation.

“Retirement property in the Western Cape in-particular is a popular investment, with many people nationally looking to retire in the province.” Latest Central Statistical Service stats reveal that the Western Cape has the highest life expectancy of all the provinces in South Africa, at 67,7 years of age, the national average being 62,8 years of age.

“Eighteen to 20% annual increases are not uncommon in the retirement market. With the more upmarket facilities, this can mean anything from a R150 000 to R250 000 increase in value every year.”

To safeguard their investment, Masters urges potential buyers to scrutinise the schemes being offered by retirement project developments, but not to be put off by systems employed to manage levies.

“It’s common for retirement developments to expect you to forfeit a portion of your property’s resale value to the village, which directly goes into the “levy stabilisation fund”. Investors need to be wary of the implications of paying reduced levies in exchange for giving up a larger portion of your investments re-sale value.” This often means that when a house is sold, approximately 5% - 10% goes to a trustee account - reserved specifically for managing levy costs. “This is a sound practice that ensures your capital appreciation will be positive in the event of either selling your property or leaving it as part of your estate.

“The current residential property market may be in flux, but retirement property is consistently proving more and more lucrative as an investment. To ensure the best returns it’s important to plan early in order to avoid being priced out of the market. Particularly as it’s potentially the last property investment that you will make,” concludes Masters.

Article from: