Easy living: The Evergreen retirement village in Muizenberg has communal facilities, medical services and a walkway set in indigenous flora – but a luxurious lifestyle comes at a price. Photo: Supplied
Retirement villages focus on lifestyle and people moving to them seek a vibrant environment that contrasts with the old-age homes their parents went to, many of which had a dreary outlook.
Today’s retirees want to interact with other people who share similar interests. They want quick access to medical services and opportunities to participate in regular sports and leisure activities, such as aquacise and drinks with their friends.
In 2008, Evergreen opened its first retirement village in Muizenberg. It was initially designed to be a residential estate, but was launched during the 2008 financial crisis. The developer decided to reconsider what South Africans want, and stumbled across “life rights”.
Life rights is not a money-making investment. It is about securing a comfortable, worry-free place to live in retirement.
Life rights is a contract that individuals or couples enter into, giving them the right to live in a property until they die or vacate the property. They pay a single amount upfront, much like a deposit. The amount varies from a few hundred thousand rands to millions, depending on location, the size of the homes, the amenities offered and so forth. At no point do they own the property, and no transfer duties or VAT are paid by the person obtaining life rights.
The property developer or managing company is responsible for running and maintaining the asset, similar to a tenant-landlord relationship. This takes a huge burden off the retiree’s shoulders.
A monthly levy is paid for maintenance, security and the use of facilities such as a community centre and healthcare services. Again, the amount paid varies from one retirement village to another.
When the resident dies or leaves, the property owner resells the life rights to someone new. Some retirement villages refund the initial payment minus fees or a portion (for example, 50% or 75%) of the initial payment. The village keeps the rest (or all of it) to maintain the property and fund operations. Or you — or your estate — may get nothing, depending on the contract. Always check the details in the contract.
There are now eight Evergreen retirement villages in the country.
PSG Alpha Investments, a subsidiary of the JSE-listed PSG Group, owns a 50% stake in Evergreen Lifestyle, a division of Amdec Group.
According to the Evergreen Lifestyles website, the PSG Alpha investment amounted to a R675 million subscription for new shares, one of the most significant initial cash investments by the group. Essentially, PSG bought an income stream.
I wouldn’t say that life rights is necessarily the best financial investment in terms of monetary returns; it’s a lifestyle purchase. But it is one of the best investments when it comes to peace of mind. It’s about the individual’s benefits. Retirement villages generally have excellent security, a sense of community and systems in place to make life easy.
I recently listened to the Another Brick in the Wall podcast, in which Phil Wilson, the sales director of Evergreen Lifestyle, said the company spent many years teaching South Africans about the life rights product and why it was invaluable to retirees. It’s paid off. Today, it is the preferred method for purchasing retirement village products in South Africa.
Many people assume that the average age of people moving to retirement villages are those in their fifties or sixties. Barry Kaganson, chief executive of Auria Senior Living, says the worldwide trend regarding the average age of people who decide to move into retirement communities is 78.
He added that the average age of people living in their retirement developments is 82 and 83.
When you compare the different generations — from the Silent Generation (1925 to 1945) to Generation Alpha (2010 to 2024) — the Baby Boomers (1945 to 1964) are by far the wealthiest. They have had history and time on their side to accumulate assets, become educated and experience different stages of the property cycle.
Globally, this demographic is referred to as the “silver tsunami”. They have particular tastes and preferences when it comes to their ideal retirement set-up. Developers need to design these facilities around their wants to make them attractive to purchasers.
Kaganson said the main competition for their developments isn’t other retirement villages; instead, it’s the homes of their potential customers. For many homeowners, their house is usually their largest asset. For this reason, he said, it is essential to change the perception that retirement villages are restrictive.
Kaganson said it requires persuading homeowners to sell their properties and downsize for greater convenience and an improved lifestyle.
Life rights have certainly been a game changer on the South African retirement scene. People are living longer, and the retiree segment of the market is large and growing.
I have always wondered about the legalities of retirement developments and who is allowed to stay there.
The Housing Development Schemes for Retired Persons Act 65 of 1988 governs life rights schemes and the rules and regulations of retirement villages.
The Act states that the minimum age requirement to live in a retirement village is 50.
This Act originated in the early days of retirement village developments, when many projects went bankrupt. This hit many people who had sold their houses and had invested all they had in such a development. For an older person, these financial losses are irreparable.
I have seen retirement village offerings in South Africa that do not adhere to the minimum age requirement.
Some developers bypass these regulations by selling what they refer to as “lifestyle villages for over-50s” instead of calling them retirement villages. By selling to people under 50 and gaining access to funds sooner, developers are violating these regulations and putting older people at risk of potential losses.
Hein Ehlers, the group chief executive of Devmark Property, started developing in the retirement sector in about 1992. He said that during this time, there were very few property developers playing in the retirement market. Today, the competition has increased tremendously.
In the early 2000s, when marketing one of the Devmark retirement villages, an entire marketing campaign could be limited to within a 15km radius of the development’s location, and 85% of the buyers would come from there.
Today, marketing is different because of semigration and communication technology. Marketing is also more specific; marketing metrics can target potential customers.
Devmark Property’s first retirement village was Clé du Cap, in the Cape Town suburb of Kirstenhof. It was developed when capital gains tax did not exist. This meant that property owners could buy and sell, sell and buy, without this extra cost. It was a levy-free scheme in exchange for no capital growth on the asset. Today, this concept has been substituted with the life rights offering. Devmark has nine retirement villages in the Western Cape.
You have to be a pretty large property company to pull off a retirement village. Considering that communal and medical facilities need to be included within the development, one can only imagine the cost of designing and constructing these facilities — and maintaining them.
I also imagine that much of the financing for retirement villages is driven by pre-sales and that sales are slow before the first phase because this target market wants to see the product before it invests in it.
Retirement villages are becoming increasingly popular, with new developments under way all over the country. As Baby Boomers and Generation X (1965 to 1980) approach retirement, this sector holds great promise in the property market.
Ask Ash is a column that examines South Africa’s property, architecture and living spaces. Continue the conversation with her on email ([email protected]) and X (@askashbroker).