Retirement villages in New Zealand are often marketed as the ideal solution for seniors looking for a secure, low-maintenance lifestyle. However, many retirees are unaware of the significant financial drawbacks—such as losing capital gains and high fees—that come with these arrangements. In contrast, building a granny flat or opting for multi-generational living can offer greater financial freedom, flexibility, and family support.
The Downsides of Retirement Villages
1. You Lose Your Capital Gains
One of the biggest drawbacks of retirement villages is that residents typically do not benefit from any capital gains on their property. When you move into a retirement village, you pay an Occupational Rights Agreement (ORA) or License to Occupy rather than owning the property outright. This means:
- When you leave or pass away, the village operator takes a significant portion (often 20-30%) of the sale price as a deferred management fee (DMF).
- Any increase in the property’s value goes to the operator, not your estate.
2. High Ongoing Fees
Weekly fees can range from $100-$300+, covering maintenance, amenities, and services.
- Exit fees (DMF) can drastically reduce what your family inherits.
- Additional charges for healthcare or extra services can add up quickly.
3. Lack of Flexibility & Control
- Strict rules on renovations, visitors, and even pet ownership.
- Limited ability to customise your living space.
- If your needs change (e.g., requiring higher-level care), you may have to move—and pay even more.
The Alternative: Granny Flats & Multi-Generational Living
Instead of locking yourself into a retirement village contract, consider building a granny flat (minor dwelling) or embracing multi-generational living. Here’s why this could be a smarter choice:
1. You Keep Your Capital Gains
- If the property is in your name, you (or your heirs) benefit from any increase in value.
- No deferred management fees eating into your equity.
2. Lower Costs & More Financial Security
- No weekly village fees—just standard rates and maintenance.
- Rental income potential if you don’t need the space full-time.
- Shared living costs (utilities, groceries, etc.) with family members.
3. Greater Independence & Family Support
- Live close to family while maintaining privacy.
- Flexibility to modify your home as needed (e.g., accessibility upgrades).
- Avoid the institutional feel of retirement villages.
4. Government Support & Easier Planning
- Many councils in NZ allow granny flats (up to 65m²) without resource consent under the Medium Density Residential Standards (MDRS).
- Home and Income setups can provide extra financial security.
Is a Retirement Village Still Worth It?
For some, the convenience of retirement villages (maintenance-free living, social activities, and on-site care) may outweigh the financial downsides. However, for those who:
- Want to preserve wealth for their family
- Prefer more control over their living situation
- Have family willing to help with care
a granny flat or multi-generational home could be a far better option.
Final Thoughts
Retirement villages can be expensive and restrictive, with hidden costs that erode your financial legacy. Before committing, explore whether building a granny flat, subdividing, or sharing a home with family could provide a more affordable, flexible, and rewarding retirement solution.
