Capital gains – 184 Ingenia land lease homes averaged 26% (almost $96,000)

Whether it’s Over 55s, land lease communities, or CAPs (Community Apartment Projects), delivering a capital gain is increasingly likely to be a major factor in which seniors living accommodation a baby boomer chooses. Where will Not For Profits, with no capital gain share in the retirement village offering, sit?

Many operators have quietly criticised land lease communities, for instance, in that the capital gain is low. This week we asked Ingenia what its result was, and it responded that across 184 pre-loved homes so far in FY22, the average uplift in value at time of sale is 26%, with an average price growth of $96,000.

We hear of dated retirement village homes – meaning 20 years or older – that were planned to sell at $900,000 be escalated to $1.4 million when aggressively priced by the sales team. This is an actual story from the last month.

As the operator told us, the discussions with family about sharing the cost of refurbishment has evaporated as price growth far eclipses that cost.

Baby boomers have largely made their wealth through tax-free property value increases. It is likely that they will be far more questioning of no capital appreciation participation. This is especially the case when residential apartment developers are now engaging aged-focused concierge services in their sales mix, blurring the line between apartment development and a retirement village offering.

If a Not For Profit is commencing the building of a new village today – an up to seven-year journey – assuming no capital gain in their business case could be a significant danger.

In seven years’ time, expect many alternative product offerings with potential capital gains a bedrock.