What Land Lease Needs to Unlock its Potential

Australia’s $5-billion-plus land lease sector must overcome a key problem before its potential can be unlocked. The sector is just 1.34 per cent of homes for over-55s, yet with 22 per cent margins and 18 per cent internal rates of return, according to Colliers land lease community market overview, the fundamentals are strong. The big problem is buyers don’t know what a land lease community is—and they don’t care. Serenitas chief executive Von Slater says the case is compelling to change this and it’s already been proven it can work. Slater was among industry leaders who took part in The Urban Developer ’s first Land Lease Summit, held in Brisbane in September. “Logan in South-East Queensland is the highest penetrated place in Australia [for the sector], and it’s at 6 per cent and forecast to be at 7 per cent in the next 18 months,” Slater says. “And this highest-penetrated market is still selling at the highest rate.” The chief executive says if you look at less established markets there’s a lot of headroom. “You then look overseas to the most comparable market, which is the US, and they’re at 12 to 14 per cent in retirement age as well, so there’s a lot of growth to go [here],” Slater says. “If you look at all the sites operators have, we’re actually not keeping up with the demand even at the lower penetration rates. “When you look at the national average, the 1 to 2 per cent, you can look at state-by-state opportunities.” ▲ The Urban Developer's Taryn Paris, Ingenia Communities’ executive general Michael Rabey, AVID Property Group’s Manuel Lang, Serenitas’ Von Slater and Edwards Group’s Stephen Edwards during the summit. The secret to Logan’s success is not in its location, which is neither seachange nor treechange, it’s something else. “It’s just an accepted model in that area,” Slater says. “The referral rate, whether it’s referring people into the community you live in or talking about someone’s cousin lives in one of those communities, so therefore it must be acceptable.” Avid Property land lease community general manager Manuel Lang says education has always been a challenge. “For a long time, the sector purposely differentiated itself from retirement,” Lang says. “In fact, with one of my first employers, we ran advertising and said, ‘not retirement’. “That’s one of the challenges the industry has: just pitching itself to exactly what it is that we do.” ▲ A rendering of a land lease community planned at Diggers Rest by Avid Property Group. Colliers national director, healthcare and retirement living, Chris O’Driscoll says if people knew what they were buying into, they would look at land lease communities as the option. “Thirty-nine per cent [of over 55s] don’t know the difference between land lease communities and retirement villages—and 43 per cent don’t care,” O’Driscoll says. “There’s potential for market education in other states.” Slater says since she’s been in this industry, the biggest competitor for all developers is complacency. “That’s customers sitting on the couch not considering these options, whether it’s us or whether it’s a traditional retirement,” Slater says. “The more of us sharing the bill of marketing and teaching people what land lease is, the better for all of us, because that complacency is what’s going to hold people back.” Ingenia Communities executive general manager Michael Rabey says that at the moment, the sector isn’t compelling enough for people to give up their family home and go through the process. “I think retirement villages have done a better job, and they’ve been more sophisticated for longer and that’s showing in that sector,” Rabey says. “They target their market and they’re targeting government really well and other parts of the system. “We could pretty much just go and get their stuff and photocopy and put land lease on it and just write no DMF [deferred management fee] and I think that’d be enough although that might cause a stir.” Bridging the gap between suburbia and seniors Manuel says AVID is already tapping into buyers as part of large residential subdivisions in the suburbs within the Vantage by Avid brand. “Less than 10 per cent of our customers were actually over the age of 50, buying land or a house and land on a single contract,” Manuel says. “Then we were missing a large portion of the market. “It’s clear to me that to have a really well balanced, exciting, community fabric you need to cater products for a whole spectrum of the demographic. “The old theory used to be that you want the parents to live close enough so that the kids can come and visit, but not so close that they’re coming and visiting all the time. “So when you look at some of the land holdings that AVID property group has with some of its masterplan communities, there’s an easy 10 to 12ha of land available there.” ▲ Lincoln Place land lease community in the Coral Cove Ocean Estate near Bundaberg in Queensland. Another developer mixing demographic and greenfield potential is Lincoln Place, which just filed a 207 land lease home play with the Bundaberg Regional Council. Lincoln Place chief executive Paul Yeo says they planned to add a community within DevCore’s $1.1-billion Coral Cove Ocean Estate across an 8.9ha greenfield site. “These plans intend to deliver quality downsizing options for the region, where over-55s make up more than 40 per cent of the population, 12 per cent higher than the Queensland average,” Yeo says. With penetration still hovering at just over 1 per cent nationally, the sector’s potential is there. All that’s needed are the right steps to realise it.

What Land Lease Needs to Unlock its Potential

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