New Zealand Retirement Village Database. Whitepaper May 2014

Transcription

1 New Zealand Retirement Village Database Whitepaper May 2014

2 JLL is pleased to announce that its Subscriber New Zealand Retirement Village Database (NZRVD) 2013 is available for purchase. The Subscribers NZRVD contains a selection of data fields from the JLL s Master NZRVD 2013 which is used for consultancy and valuation purposes. With New Zealand s growing demand for retirement accommodation the Subscribers NZRVD will assist subscribers to make more effective retirement village related investment, development, marketing and service provision decisions. Which in turn provide positive impacts for the industry as a whole through increased demand generation and general efficiencies. JLL have a dedicated team of well-known; respected and experienced property professionals who offer a wide range of valuation and advisory services and which are complimented by our research; plant and machinery and other divisions. Please contact Michael Nimot for an obligation free quote for your mortgage; asset and insurance needs. For more information contact: Angela Webster Economist and Research Consultant angela.webster@ap.jll.com Michael Nimot Director Health and Aged Care Mobile michael.nimot@ap.jll.com

3 Contents Page Executive Summary 4 Introduction 6 NZ s Ageing Population 6 NZRVD 2012 vs Summary Results Table 8 Village Ownership 8 Village and Unit Numbers by Region 8 Unit Type Break-Down 9 Age Profile 9 Availability of Higher Care Facilities 9 Penetration Rates 10 Demand Drivers; Macro and Micro 11 Increasing Penetration Rates Demand Generation Potential 11 Demand Sensitivity 12 Development Pipeline Supply Side 12 Development Pipeline Five Largest Operators 13 Summary 15 3

4 Executive Summary NZ s Aging Population There is no doubt that NZ s population is aging like it has never aged before. The 2006 to 2013 census years provide an insight into this impressive growth with an additional 111,429 entering the 65+ year s age group, a growth of 22.5% 2006 to 2013, compared to a total population growth of 214,101 and 5.3% over the same time period. The growth within the 65+ years age group is not expected to slow anytime soon, with an increase of circa 160% forecasted from 2012 to 2061, a growth from approximately 600,000 to 1.55 million. The percentage of the NZ population within this age group is projected to increase from 14% in 2012 to 26% by The majority of retirement village residents are aged 75+ years, this age group is projected to experience a growth of circa 16,000 residents per annum from 2014 to If we assume that this growth within the 75+ age group is translated into potential retirement village demand (using a 12% penetration rate and average village occupancy of 200 residents), this equates to a demand for 10 villages per annum for the next twenty years. NZRVD Statistics: 2012 to 2013 The NZRVD 2012 identified 343 retirement villages within the New Zealand market, with the NZRVD 2013 identifying 351, a change of 8 villages. Total estimated units increased from 21,815 in 2012 to 24,148 in 2013, a growth of 2,333 units and 2,636 residents. The growth in unit numbers has occurred not only through the eight new villages but also a notable amount of villages adding value through expansions, thus increasing the average village size from 64 units in 2012 to 69 in The JLL Research and Consulting team have estimated a growth of 0.3% in the 65+ year s penetration rate, and 0.7% in the 75+ year s penetration rate, once population forecasts vs. actual counts are taken into account, between the 2012 and 2013 databases. Another interesting dynamic change between the databases is the fact that Ryman overtook Metlifecare as the largest operator in terms of unit numbers, with the addition of 603 units, and a growth of 18% 2012 to Whilst Bupa remains the smallest of the five largest operators they experienced robust unit growth of 252 and 31% over the same time period. Penetration Rates The NZRVD 2013 estimates a national penetration rate amongst the 65+ demographic cohort of 4.5%, and a penetration rate amongst the 75+ demographic cohort of 10.5%. These rates are heavily differentiated across the regions, with the uppermost 75+ year s penetration rate experienced in the Bay of Plenty with 16.4%, compared to 0% in the West Coast. Auckland is estimated to have a 65+ year s rate of 5.3% and a 75+ year s rate of 12.8%. There is also notable polarisation between the penetration rates experienced in the North Island vs. the South Island, for example the 75+ years rate is 11.7% in the North Island compared to 7.3% in the South Island. This reiterates the preference of retirement village residents for warmer climates. Demand Whilst NZ s aging population is clearly a major demand driver within the retirement village industry another is the potential to increase the penetration rates. Whilst we have seen a 0.7% increase in the 75+ penetration rate between 2012 and 2013, to continue driving this rate upward the industry will need to focus on a number of areas which include the availability of suitable product, as well as matching affordability and local socio-economic considerations to village development. Within this white paper is a demand sensitivity analysis which concludes that with an aging population, as forecasted by Statistics NZ, along with a 75+ year s penetration rate of 10% would generate a demand for circa 30,000 units, which equates to 170 villages with an average size of 200 residents from 2016 to While under a scenario of an aging population combined with a 3% rise in the 75+ penetration rate a potential demand of 47,000 units and 265 villages, with an average of 200 residents per village, is generated. This equates to 1,500 units per annum under the base scenario and 2,350 units per annum under the 3% penetration rate rise scenario. Supply The 2013 NZRVD development pipeline data indicates a total pipeline of 10,646 units, 6,017 at 88 currently operating villages and 4,629 at 40 new villages, yet to be registered with the NZ Companies Office. In addition to these units, which are within the early planning stage through to under construction, there is also a notable amount of land banking occurring within the industry, particularly within the Auckland region. In theory the development pipeline within the early planning to under construction stages (no land banking) will take between five to seven years to be absorbed by the market. A fully developed large format retirement village is around a six to eight year project, if time frames and the resource consent process goes smoothly, thus providing a time frame for demand to be generating to take up the supply. 4

5 Summary The results of the NZRVD 2013 provide little indication of a potential wide-spread oversupply within the NZ retirement village industry, there is however some indication of potential short-term oversupply within the Auckland region if the significant land banking of the five largest operators comes online within a similar time frame. To avoid any overhang of supply, and the costs associated with a less than ideal absorption rate, a comprehensive understanding of the market, local demographics and competition is therefore critical in ensuring successful product take-up time frames. 5

6 Introduction JLL is pleased to announce that its Subscriber New Zealand Retirement Village Database 2013 update (NZRVD) is available for purchase. The Subscribers NZRVD contains a selection of data fields from the JLL s Master NZRVD which is used for consultancy and valuation purposes. The Master NZRVD 2013 is a comprehensive one stop location for data on the retirement village industry in New Zealand with 351 records of villages registered with the New Zealand Companies Office (NZCO). There is also a further 57 records of currently un-registered retirement village type accommodation and 40 records of retirement villages within the development pipeline, but yet to be registered with the companies office. This makes a total of 448 comprehensive data records. In order to qualify as a retirement village the property must have multiple units, accommodation and service/facilities, mainly for people in their retirement and the residents pay a capital sum in return for their right to live in the place. The Subscribers NZRVD includes: Village name and database ID, location and owner information Contact details, mapping coordinates, year established Facilities available at each village, tenure details and unit configuration totals Provision of a care facility While the Master NZRVD, used for consultancy and valuation services, includes: The components of the Subscribers NZRVD as well as sales and marketing contacts Building type data, ORA details, entry fee and capital gains returns details Maintenance fees, DMF data by year, vacancy and turnover data Estimated resident counts, detailed development pipeline information Care facility information (bed counts) and companies office disclosure dates This white paper provides a summary and insights into what the Master NZRVD 2013 has revealed, particularly the changes which have occurred between the 2012 and 2013 databases. We are all aware of New Zealand s aging population and the corresponding opportunities available in the sector, but just how much demand is there and when will it come online. The paper also describes the supply side development pipeline and whether there is the potential for a disparity between supply and demand levels in the coming years. We also take a look at the five largest industry players and what has occurred to unit numbers and development pipeline for them from 2012 to In order to analyse and forecast the economic forces of supply and demand reliable comprehensive nationwide data is paramount and this is where the JLL NZRVD comes into play for the supply side of the equation. JLL NZ also addresses the demand side of the equation with its in-house research and consulting services, which provide customised services for a wide range of clients. NZ s Aging Population - What it means for the Industry Historical Growth and Population Counts As New Zealand s population continues to age we are seeing both social and economic developments such as health care provision, social support for the elderly and pressure on families. This demographic development also presents considerable opportunities to certain sectors of the economy. One of these opportunities is in the provision of aged care accommodation, of which retirement villages are playing an increasing notably role. The 2013 Census of Population and Dwellings revealed that there were 607,032 New Zealand residents who were aged 65 years and over. This was an increase of 111,429 residents, and a growth of 22.5%, from the 2006 count of 495,603. The 2013 Census also revealed an increase in the proportion of the total population aged over 75 years. The total of 260,898 was an increase of 30,777 and a growth of 13.4% from the 2006 count of 230,121. Another statistic of note is the percentage of the total population within the 65 plus age group, which increased from 12.3% in 2006 to 14.3% in 2013, a change of 2.0%. 6

7 NZ Population Counts Census Years 2001/2006/2013 Census Years 2001/ / Count Change % Change Count Change % Change Total 3,737,280 4,027,947 4,242, , % 214, % 65+ yrs 450, , ,032 45, % 111, % 75+ yrs 204, , ,898 25, % 30, % Population Forecasts 75+ Years As a majority of residents within NZ retirement villages are aged 75+ years the following section focuses on this age group and the population projections within this sub-category of NZ s residents. We are basing our analysis in this paper on the Statistics NZ population projections of the 75+ age group to Under median conditions Statistics NZ have forecasted a growth of circa 315,800 residents from 2014 to 2034; this would take the percentage of the population within this age group from 6% in 2014 to 11% in Over this 20 year time frame we would be looking at the growth per annum of circa 15,800 residents within the 75+ age group. To put this into a simple but conservative retirement village demand framework, if we took a penetration rate of 12% and an average new village size of 200 residents, this would equate to a demand of circa 10 villages of this size per annum for the next twenty years. This underlines the level of interest being shown in this industry from developers and investors alike. Having established the potential for industry growth we next turn to where in NZ this growth the 75+ age group is projected to take place. There is a significant differentiation in potential throughout NZ, with little potential in the Deep South and limited populated inland areas, Population Distribution yrs Age Group 2031 and remarkable potential within the heavily populated coastal areas. This distribution of potential is illustrated in the following section. Population Distribution 2031 Where in New Zealand is the 75+ year s population expected to be concentrated in 2031? While all local populations are ageing in NZ, there is a noticeable geographic element that underlies the location of the ageing population. Inter-regional differences in age structure are fairly marked, and this is due largely to variations in fertility, life expectancy and internal migration patterns. The distribution of the population aged 75+ years in the NZ is expected to be concentrated within the North Island, particularly in the coastal regions. There are also hot spots within the South Island within city locations and the Marlborough and Tasman Districts. Auckland is expected to have circa 153,730 residents aged 75+ years by 2031; therefore of NZ s population within the 75+ age group 29% will be living within the Auckland region by NZRVD 2012 vs What are the changes? A comparison of the villages within the database between the 2012 and 2013 databases show an increase in village count of eight, an increase in unit numbers of 2,333 and circa 2,636 in estimated residents. These changes equate to a growth of 2.3% in village numbers and 10.7% in unit and residents counts. 7

8 Summary Results Table* NZRVD Villages Units Estimated Residents Penetration Rate 65+ yrs 75+ yrs ,815 24, % 9.4% ,148 27, % 10.5% Change 8 2,333 2, % 1.1% (Source: JLL NZRVD 2012 and 2013) The penetration rate within the 65+ age group increased from 4.2% to 4.5%, while the 75+ age group penetration rate increased from 9.4% to 10.5%. *These penetration rates have been impacted by two factors, the first being the increase in units and estimated residents, the second being that the 2012 rates are based on estimated population counts undertaken in 2010 based on the 2006 census counts, while the 2013 counts are actual counts from the 2013 Census of Population and Dwellings undertaken in March The differentiation between the estimated counts and the actual counts has impacted the resulting penetration rates. Village Ownership Five Largest by Estimated Unit Numbers Parent Companies Estimated Units Villages No. NZRVD 2013 NZRVD 2012 Average No. Units/Village % of Total Market Estimated Units Villages No. Average No. Units/Village % of Total Market Ryman 3, % 3, % Metlifecare 3, % 3, % Summerset Villages Ltd 1, % 1, % Oceania 1, % 1, % Bupa Care Services NZ Limited 1, % % Total 11, % 10, % (Source: JLL NZRVD) Removing this differentiation between estimated population counts and actual population counts we find the adjusted penetration rate growth for the 65+ rate to be 0.3%, while the actual change in the 75+ rate is 0.7% rather than 1.1%. However, despite the lower growth rate in the 75+ penetration rate this is still a substantial change which will generate notably higher demand for the industry in the years to come. The estimated unit numbers at Ryman owned NZCO registered villages, as at the end 2013, indicate 3,951 units over 26 villages, resulting in an average sized village of 152 units. The second largest operator is Metlifecare with an estimated unit count of 3,833 over 23 villages, resulting in an average sized village of 167 units. Summerset Villages Ltd had an estimated count of 1,812 spread over 16 villages, average sized village of 113 units. Oceania had a unit count of 1,216 over 26 villages, average sized village of 47 units. While Bupa Care Services had a count of 1,067 units over 26 villages and an average village size of 41 units. The five largest parent companies continue to account for almost 50% of the NZCO registered retirement villages units on the market. However, we would expect this percentage to increase over the next ten years through acquisitions and the strong development pipeline of these large investors in the sector. The foremost change between the results of the 2012 and 2013 NZRVD was Ryman overtaking Metlifecare as the largest operator in terms of unit numbers, with a growth in unit numbers of 603, a growth of 18% between November 2012 and Also whilst Bupa is the smallest of the five operators, in the area of retirement village units, they experienced a growth in unit numbers of 252 and 31% 2012 to Overall the top five experienced a growth of 1,167 units and 11%. Village and Unit Numbers by Region Of the 351 NZCO registered villages 73 are located within the Auckland region, followed by 62 within the Canterbury region and 39 in the Bay of Plenty. 8

9 Unit numbers by region indicate a count of 7,702 units in the Auckland region which equates to 32% of the total market; this is followed by a count of 2,967 in the Bay of Plenty which has circa 12% of units, therefore these two regions alone account for circa 44% of the total industry. There is significant differentiation in village size, for example the villages within the Canterbury region have an average size of only 40 units, compared to an average of circa 75 units in the Bay of Plenty and circa 100 in the Auckland Region. New villages within the development pipeline indicate that we will see a prominent increase in average village size in the future with many greenfield developments of the largest industry operators producing village plans containing 250 units. The current average village size within the NZRVD 2013 is 69, compared to 59 in Australia and circa 250 in the US. Village Numbers NZRVD 2013 Taranaki, 9 Southland, 7 Northland, 17 Otago, 13 (Source: JLL NZRVD) Waikato, 34 Nelson - Tasman - Marlborough, 16 Manawatu - Wanganui, 25 Hawkes Bay, 16 Wellington, 35 Gisborne, 5 Auckland, 73 Canterbury, 62 Unit Type Break-Down Bay of Plenty, 39 The 2013 NZRVD estimates the following unit type break-down within NZCO registered retirement villages: Villas/units 55%, serviced apartments 21%, independent apartments 14%, townhouses 9% Assisted Living Units 23% and Independent Living Units 77% There has been little change in overall unit type composition between 2012 and 2013 There is differentiation in village configuration between the regions, with villages in Auckland having more intensive configurations compared to lower density areas such as Manawatu-Wanganui. Unit Numbers NZRVD 2013 Taranaki, 539, 2% Southland, 315, 1% Northland, 799, 3% Waikato, 2,098, 9% Otago, 785, 3% Manawatu - Wanganui, 1,442, 6% Hawkes Bay, 1,071, 5% Nelson - Tasman - Marlborough, 938, 4% (Source: JLL NZRVD) Gisborne, 292, 1% Age Profile Wellington, 2,683, 11% Canterbury, 2,517, 11% Auckland, 7,702, 32% Bay of Plenty, 2,967, 12% The age profile indicates 35% of villages have been established since 2001, while we still have 35% pre 1990 s, with 11% of these pre 1980 s. It is JLL s view that 35% of villages established pre 1990 s presents a challenge for the industry in the fact that such stock may not provide the appropriate type of dwelling, village structure and facilities that meet the expectations of today s and future residents. Analysis of newer developments indicates there is a trend towards more spacious accommodation, a greater range of facilities and continuation of care in the form of a care facility. Availability of Higher Care Facilities The demand generation potential of providing higher care services, such as rest home and/or hospital facilities, within retirement villages is increasingly being acknowledged and acted upon by industry players. The percentage of villages providing higher care facilities has increased from 63% in 2012 to 65% in Of the 35% which currently do not contain any higher care facilities, 8% have such facilities within the development pipeline. For example of the thirteen villages within Summerset s development pipeline eleven have plans for care beds; 595 care beds are contained within the pipeline compared to 2,116 retirement units. Summerset have stated in their annual report 2013 that they will focus on continuum of care model. 9

10 Penetration Rates The penetration rate helps measure the degree to which a market is either underserved or saturated and between years provides an indication of the growth within the industry. It also offers an indicative percentage of the demand for future retirement villages. The rate is based on the methodology of the percentage calculated by dividing the estimated number of people living in retirement village units divided by either the population count in the area aged 65+ years or 75+ years. Penetration Rates by Region 2013 Region NZRVD 2013 PR 65+ Years PR 75+ Years Estimated Resident Count Population Count Penetration Rate Population Count Penetration Rate Auckland 8, , % 67, % Bay of Plenty 3,353 46, % 20, % Canterbury 2,844 83, % 37, % Gisborne 330 6, % 2, % Hawkes Bay 1,210 25, % 11, % Manawatu/Wanganui 1,629 37, % 16, % Nelson/Tasman/Marlborough 1,060 25, % 10, % Northland , % 11, % Otago , % 13, % Southland , % 6, % Taranaki , % 8, % Waikato 2,371 59, % 25, % Wellington 3,032 62, % 26, % West Coast 0 5, % 2, % New Zealand 27, , % 260, % North Island 22, , % 190, % South Island 5, , % 70, % (Source: JLL NZRVD) The above table combines the estimated resident counts within NZCO registered villages within the NZRVD in 2013 with the 2013 census counts of NZ residents aged 65+ years and 75+ years. The result is an estimated retirement village penetration rate by region. The 65+ rate is often cited in retirement village associated literature; however, research has indicated that most residents enter around 73 years of age and the average age within the village is 79 years, therefore we prefer the 75+ penetration ratio, as such we provide both the 65+ and 75+ ratios. The results indicate a 65+ rate of 4.5% and a 75+ rate of 10.5% within NZ as a whole The region achieving the highest penetration rates was the Bay of Plenty with 7.2% and 16.4% respectively This indicates a region with a higher acceptance level of retirement village accommodation and indicates that the area may support higher penetration rates than the market as a whole. The current penetrate rates within an area can be a key indicator in determining the demand potential of that area. Auckland experiences rates of 5.3% and 12.8% respectively International Comparisons: With NZ s penetration rate of the 65+ age group at approximately 4.5%, this compares to an Australian rate of circa 5%, while in the US it is estimated to be much higher at circa 10-12% 10

11 The North Island experiences notably higher penetration rates than the South Island An extensive development pipeline for the Auckland Region we would expect the penetration rate in the region to increase notably over the next few years, we also expect the differentiation between the North and South Islands to deepen. Penetration Rate Analysis 2012/2013 Resident per Unit Ratio 65+ Years 75+ Years Resident Ratio/Unit Resident Ratio/Unit Resident/Unit Ratio NZRVD % 4.8% 9.4% 10.8% NZRVD % 5.2% 10.5% 12.0% Change 2012/ % 0.4% 1.1% 1.2% (Source: JLL Research and Consulting) While we have looked at the impacts of using estimated population counts in 2012 and actual counts in 2013 in the section NZRVD 2012 vs What are the changes?, this section takes a look at the impact of using different resident per unit ratios. While in the NZRVD we use a ratio of 1.13 residents per unit, the major industry players often use a ratio of 1.3 in resource consent applications; therefore, we have provided both ratios in previous table. The results indicate that using a higher resident per unit ratio increases the penetration rate from 4.5% to 5.2% in the 65+ rate and from 10.5% to 12.0% for the 75+ ratio in Therefore, we believe that the penetration rates provided through the NZRVD can be viewed as conservative. The change in the penetration rates from the 2012 to 2013 results indicates a slightly higher growth of 0.1% between the two residents to unit ratios. Demand Drivers; Macro and Micro Demand drivers for increasing the penetration rate are many and varied and include the following at a macro level; Greater acceptance of the retirement village style of living Quality and offering advances of the industry Longer life expectancy and reliance/ demand for continuation of care throughout the aging years Visitation of partner/spouse if in rest home, hospital or dementia care on site Increased demand for an easier way of life (less worry about gardening/lawns, empty house when travelling etc.) As well as a greater demand for security and the social aspects the village lifestyle can offer Increased knowledge of the industry and what it has to offer, both by the potential residents and their children/careers will also help to drive up penetration rates On the other hand demand and supply restrictors include the New Zealand s Government s policy of ageing in place, limited funding increases and stringent lending criteria for retirement villages and care facilities. At a micro level demand within individual locations can be driven by positive local features such as the access to facilities in the area, a large population base, affordability levels and new product availability, i.e. new construction of retirement villages can drive up the penetration rate in an area, coastal locations and locations with views. The major growth location for retirement village development has been, and will continue to be, in the coastal regions of New Zealand near large metros. The main reason being that often coastal landscape is therapeutic for residents not just in terms of its physical or climatic character, but also through its imputed social characteristics, and historical layering s as a healthy place. Increasing Penetration Rates Demand Generation Potential An increasing penetration rate is a major driver of retirement village demand generation. Availability of suitable product is one factor determining penetration rates, as well as the availability of alternative retiree housing options, affordability and local socio-economic considerations are also major factors driving penetration rates. Residential market affordability and liquidity are key influential variables on the demand side. Current residential market conditions, particularly within the Auckland region, indicate positive transferal rates for potential retirement village residents, however, developers must take into account the risk that residential market affordability and liquidity can change for the negative, as experienced in the years following the GFC. Many areas in New Zealand are expected to achieve higher penetration rates in coming years due to the combination of an ageing population, a greater acceptance of living in a retirement village and newer more suitable product being developed. While the national 11

12 penetration rate is at circa 10.5% for the 75+ years group this could rise substantially. The impacts/sensitivity of unit demand to penetration rates is looked at in the following section. Demand Sensitivity years Penetration Rates: 10% to 13% Year 75+ Population Penetration Rate 10% 11% 12% 13% ,000 30,200 33,220 36,240 39, ,600 35,760 39,336 42,912 46, ,000 44,800 49,280 53,760 58, ,800 53,780 59,158 64,536 69, ,600 63,960 70,356 76,752 83,148 Change 2016/ ,600 33,760 37,136 40,512 43,888 (Source: JLL Research and Consulting; SNZ) The previous table indicates that the NZ population aged 75+ years is projected to increase from a count of circa 300,000 in 2016 to 640,000 in 2036, if the penetration rate was to remain at a stable 10% over this time frame the additional retirement village demand generated through an aging population alone would be circa 34,000 residents or circa 26,000 to 30,000 units. If the industry experiences not only an aging population but also an increase in penetration rate from approximately 10% to 13% over this time frame the demand would increase by circa 53,000 residents or 41,000 to 47,000 units. Therefore, of these 53,000 additional retirement village residents between 2016 and 2036, 34,000 would be generated through an aging population and 19,000 through a 3% increase in the 75+ year penetration rate. Therefore the aging population and potential penetration rate increases are expected to create significant retirement village accommodation demand over the next twenty years. For example, under the base scenario of 10% penetrate rate and additional demand of circa 34,000 residents and 30,000 units, this equates to 170 villages with an average of 200 residents per village. This increases to 47,000 units and 265 villages under an aging population plus a 3% rise in the penetration rate scenario. This equates to 1,500 units per annum under the base scenario and 2,350 units per annum under the 3% penetration rate rise scenario. Whilst we have looked at the potential demand side of the economic equation in the previous section, we now turn our attention to the supply side, with a look at the development pipeline data captured in the NZRVD Development Pipeline Supply Side JLL NZRVD records detailed information about the development pipeline of the NZCO registered retirement village industry from the point of village planning being underway (i.e. land banking is recorded to some extent but not to a point where we can comment on the total level of land banking occurring in the industry). Of the 351 NZCO registered retirement villages 88 had some level of development pipeline, while there is an additional 40 new villages within the pipeline, yet to get registered with the NZCO, as at end The 88 Registered NZ Companies Office village s development pipeline had: A mix of planning stages and commencement but in summary circa 15 were in the early planning stage, 19 in the in planning stage and 54 where in some stage of under construction 1 There was a total of 6,017 units in the pipeline The Auckland region captured 1,432 of the development pipeline units, 24% of the total units, while the Bay of Plenty region captured 1,052, 17% of the total units The 40 New Build Villages: currently unregistered development pipeline had: A mix of planning stages and commencement but in summary circa 27 were in the early planning stage, 8 in the in planning stage, and 5 in some stage of under construction There was a total of 4,629 units 2,476 of the units, 53% of the total units, are situated in the Auckland region Of the total pipeline information captured in the NZRVD 2013 the Auckland Region totalled 3,908 units and 37% of the total pipeline. This is followed by 1,336 units and 13% in the Wellington region, 1,202 and 11% in the Bay of Plenty region and 1,198 and 11% in the Canterbury region. The results by region are provided in the following table. 1 Early Planning: this stage is prior to resource consent being granted In Planning: where resource consent has been granted Under Construction: this indicates that the main contract for at least some of the work has been awarded and work has started, or is about too, on some part of the villages construction 12

13 Development Pipeline Summary Table Region Villages Units Registered Villages New Builds yet to be Registered Total Villages JLL have estimated unit numbers Villages Units Villages JLL have estimated unit numbers Units % of Total Pipeline Auckland 19 1, , ,908 37% Bay of Plenty 14 1, ,202 11% Canterbury ,198 11% Gisborne % Hawkes Bay % Manawatu- Wanganui Nelson/Tasman/ Marlborough % % Northland % Otago % Southland % Taranaki % Waikato % Wellington ,336 13% TOTAL 88 6, , , % (Source: JLL NZRVD 2013) The demand pipeline is largely Auckland focussed; this is particularly the case within the unregistered new village s category. Auckland has also been the focus for land banking which is not included in the previous table. Land banking is looked at in the following section, along with the summary of the NZRVD 2013 development pipeline data for the five largest retirement village operators in NZ. Development Pipeline - Five Largest Operators The following table listed the results of the development pipeline data gathered through the NZRVD 2013; this data does not include land banking as the development needs to be within the early planning stage to get into the NZRVD database, however, some land banking information is provided within the following paragraphs. Registered Villages Development Pipeline Units Unregistered Villages Total Ryman ,460 Metlifecare Summerset 893 1,444 2,337 Oceania ,190 Bupa TOTAL 2,766 2,954 5,720 (Source: JLL NZRVD 2013) 13

14 Summerset has the largest development pipeline of the five largest operators as captured within the NZRVD Summerset has a target development pipeline of 250 units in 2014 and 300 per annum in 2015 and beyond, as stated in the Summerset Annual Report With a build rate of 300 units per annum it would take Summerset seven to eight years to complete their current development pipeline. Ryman has the second largest development pipeline as captured by the NZRVD 2013; however they also have four unannounced sites in their land bank with an estimated capacity for 400 serviced units and 594 independent units, a total of almost 1,000 units and an average of 250 units per site. All four land bank sites are located within the Auckland region. Whist Bupa s retirement village operations have a limited development pipeline within the early planning plus stages of development, Bupa have a notable land bank in Wellington, Christchurch and a number of sites in Auckland; Apollo Drive, Mairangi Bay and West and South Auckland. 14 The land bank is largely focused on the Auckland region, with Ryman, Summerset and Bupa alone having substantial land banked within the region. This focus of development within the Auckland region may lead to short term over supply; however, demand is expected to take up this supply with relative ease as the aging population and increasing penetration rates generate significant demand levels, as illustrated in the previous section. This is particularly the case under current residential market conditions, with positive affordability and liquidity features facilitating the transition of potential retirement village residents from their family homes into the retirement village lifestyle. A fully developed large format retirement village is around a six to eight year project, if time frames and the resource consent process goes smoothly, thus providing a time frame for demand to be generating to take up the supply.

15 Summary An analysis of the NZRVD 2013 indicates a positive growth in penetration rates from the 2012 results of circa 0.3% for the 65+ year s penetration rate and 0.7% within the 75+ year s rate. It also finds eight new NZCO registered villages, circa 2,300 new units and 2,600 residents. The top five operators; Ryman, Metlifecare, Summerset, Oceania and Bupa account for 49% of the retirement village industry s units, a level that has remained stable since the NZRVD Demand forecasting, based in Statistics NZ s population by age group forecasts and the penetration rates provided by the NZRVD 2013 data, indicate a demand for approximately 1,500 to 2,350 units per annum from 2014 to On the other hand the development pipeline data gathered within the NZRVD 2013 indicates a development pipeline of over 10,000 units, along with a notable quantity of land banking. The 10,000 units within the pipeline would take six to eight years to be absorbed by the market under the demand criteria outlined within this paper. Whilst we can find little to indicate the potential for wide-spread oversupply within the industry, there is some indication of potential short-term oversupply within the Auckland region, this conclusion is largely based on the land banking occurring within the area by the five largest village operators. While there are indicators of strong demand forecasts over the next twenty years, moving forward the NZ retirement industry players need to be aware of all the variables involved within the demand and supply equation in order to put the right product in the right place at the right time. The development of the NZRVD and the work undertaken by the JLL s Valuation and Consultancy teams has provided more transparency and understanding of the demand and supply drivers in the New Zealand retirement village industry and we look forward to providing the industry with the NZRVD 2014 in December

16 AUCKLAND Level 16. PwC Tower 188 Quay Street PO Box 165 Auckland Ph: Fax: WELLINGTON Level 10. Lumley House 3-11 Hunter Street PO Box Wellington Ph: Fax: CHRISTCHURCH 1 Papanui Road Merivale PO Box 6466 Christchurch Ph: Fax: Angela Webster Economist and Research Consultant Mobile angela.webster@ap.jll.com Michael Nimot Director Health and Aged Care Mobile michael.nimot@ap.jll.com Justin Kean Director Research and Capital Markets Mobile justin.kean@ap.jll.com Photos supplied by Bupa; Lend Lease; Metlifecare and Oceania COPYRIGHT JONES LANG LASALLE 2014 All rights reserved. No part of this publication may be published without prior written permission from Jones Lang LaSalle. The information in this publication should be regarded solely as a general guide. Whilst care has been taken in its preparation no representation is made or responsibility accepted for the accuracy of the whole or any part. We stress that forecasting is a problematical exercise which at best should be regarded as an indicative assessment of possibilities rather than absolute certainties. The process of making forward projections involves assumptions regarding numerous variables which are acutely sensitive to changing conditions, variations in any one of which may significantly affect the outcome, and we draw your attention to this factor. Jones Lang LaSalle Licenced Under REAA 2008.