Outlook on NZ’s retirement village sector

New Zealand needs more retirement village units than ever – an additional 490 new units annually over the average 1,742 delivered annually over the last decade.

August 11, 2022

JLL recently passed the milestone of 10 years, analysing New Zealand’s retirement village and aged care industry. The key insights from our latest data are:

  1. Retirement villages across New Zealand continue to deliver new units to meet increasing demand, however, demand is outstripping the existing development pipeline.
  2. New Zealand’s population is ageing, which will continue to support the present and future demand for retirement villages.
  3. More ethnic diversity of occupiers in retirement villages will create a further need for more units in the future.
  4. The market share of the ‘big six’ operators will remain high, as evidenced by their supply pipelines.
  5. The aged care market provides a key part of the continuum of care.

Currently, an estimated 48,736 residents are in retirement villages (based on the calculation of 1.3 residents per unit). The data suggests an increase of 24,544 new units needed by 2033 to meet future demand over the current 37,489 units.

The retirement village industry is well supported by many providers and underpinned by the ‘big six’ operators in New Zealand, who currently provide 65.1% of the total units. In addition, Fletcher Living (the country’s largest residential provider) has launched its first two retirement villages under the ‘Vivid Living’ brand this year.

Figure 1: Forecast demand versus all development pipeline to 2033

Source: JLL NZ 3Q22

As New Zealand ages, so does the number of people aged 75+, creating continued demand for accommodation, which will be of significant interest to retirement village and aged care sector investment.

In 2021 there were estimated to be almost 345,960 people who were 75+ years of age, which is up 13,960 from 2020. This key demographic is forecast to increase by 221,490 by 2033 to reach 567,450 and by 265,360 by 2048 to reach 832,810.

Figure 2: 75+ population 201 and forecast to 2033 and 2048

Source: JLL NZ 3Q22

Other factors influencing the supply and demand for retirement villages, in addition to the country’s growing ageing population, include:

  • Construction costs – rising inflation and supply chain constraints may lead to longer lead times to release new units through 2022 and into 2023.
  • Cooling residential market – the median house price is reducing across many regions, and days to sell is widening – both of which may impact the settlement of new occupiers.
  • Pandemic – during lockdowns, retirement villages experienced an increase in enquiries due to many retirees (and their families) realising they do not want to be alone in case such situations arise again

Traditionally, several operators have commented that Māori, Polynesian and Asian communities make up a very small percentage of retirement village occupancy. It has been reported that tailored services, such as food and companionship offered at facilities, and tailored intervention, are required to increase Māori, Polynesian and Asian residents in retirement villages. Any increase in occupancy from these ethnicities will increase the number of units the industry would need to deliver.