At last. Someone gets it.
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Problem with essential services is that they tend to be most on the Govt watch list for control and directives which can translate shareholder's wealth into vote banks for them . Aged people is big group to be pampered or made promises . Capital sharing can be most fair sounding directive possible ahead ....:p
Maybe, but you have to remember two things. Firstly the government pays these providers a lot of money for the care of residents who qualify for subsidized care.
Secondly, the government needs these providers.All of them. There is no way the government can provide this service themselves as part of the public health system. They are 100% dependent/reliant on these providers to meet the growing need for aged care - villas, serviced/unserviced apartments, care beds, hospital care beds, and dementia care. The need for all of these services is going to continue to grow substantially. Forever.
Which means the government has to be very careful in terms of forcing any "requirements" onto providers. If they push them to far, providers will be forced to increase fees significantly (including the fee for subsidized care), and /or reduce their care services (as they are the least profitable side of the business).
The government simply can't afford to let that happen.
Look - this is a valid point and there are some supporting arguments as well as some opposing ... and yes, any investment has its risks - including political interference.
I understand as well that retirement villages are new on your watchlist- and therefore you will go through all the motions everybody else went through when they started to invest in retirement villages.
It might help though if you do some preparation / research and go through the last couple of years in this thread ... this would save us all from keeping to move in circles.
Looking forward to discuss something new with you ... :) :
Agreed, some privately owned retirement village offered commitment to never increase weekly fees for the entire occupation period. Makes sense cos the money is not really in the fees but the sale of units. Give a bit of carrot to incentivise sign-ups I suppose.
While I'm nowhere near the retirement age so I may not fully appreciate the lifestyle offered by these villages, but throughout the different villages that I came across, it is not hard to foresee that for many years to come, the demand for these units will continue to trend upwards which makes the sector very investable.
I’ve been saying there is regulatory risk for sometime. It’s one of the reasons that my holding in this sector has halved. COVID-19 Delta getting away in Auckland may reduce that risk. As in the same way COVID assisted Labour in the last election, it might well work against them in the next one,
IMO and FWIW.
If the current ORA terms were made illegal, I wonder how much less profitable for developers and shareholders would the replacement be? How much extra risk would the residents moving into the villages be expected to shoulder? How much less security of tenure would the residents be expected to suffer?
If the replacement for current ORAs resulted in less profit for developers/retirement village companies then fewer units may be built and fewer care beds supplied as the result of less cross-subsidy from ORA profits. So more retired people may end up staying in their family sized homes, reducing the supply for younger home owners with young families, exacerbating the housing shortage? Also the government may need to find extra beds for the increasing demand from baby boomers for rest home and hospital level care.
At the moment, many of the homeowners buying (of their own free will with independent legal advice) an ORA pocket part of the untaxed capital gain derived from owning their house, while in effect transferring another part of this untaxed capital gain to the owners of the retirement village. How keen would any government be in taking up this cause?