Manufactured Housing Estates Emerge as Major Property Growth Market

Manufactured Housing Estates (MHEs) are poised to emerge as one of the biggest property growth markets of the next decade, according to Australia’s longest-established accommodation market experts.

Trudy Crooks, national sales manager at Resort Brokers Australia, says two major economic and social factors – housing affordability and the ageing baby-boomer population bubble – are the principal catalysts for a boom in MHE development.

“These dual forces are driving what we’re convinced will be one of the biggest growth markets of the next decade,” Crooks said.

“While the concept of Manufactured Housing Estates (MHEs) is still in its infancy and undergoing an evolutionary phase in Australia, it is firmly on the rise.”

Key demand drivers

According to Australian Institute of Health and Welfare projections, by 2056, there will be 8.7 million older Australians (65 years+), accounting for 22% of the population.

“Along with that, demand for affordable housing options and alternatives to traditional retirement villages will also grow,” Crooks said.

“Some forecasts say retirement-led demand for MHE dwellings could surge to 50,000 extra units in the next decade.”

At the same time, Resort Brokers points to housing affordability as a key issue likely to contribute to the growth of MHE development, and the impact of 2017 Federal Budget initiatives including:

  • Encouraging seniors to downsize through superannuation concessions (ability to add non-concessional $300,000 into super from the sale of their home), and;
  • Lifting the capital gains discount by 60% for investments in affordable housing, providing an incentive for the development industry to invest in this area.

Simplicity gives MHEs an edge

Resort Brokers said the fact that MHEs fall under regulations different from those governing retirement villages will further boost retiree-led demand for the affordable, lifestyle-focused residential communities.

“MHEs actually operate in the same regulatory environment as the caravan park industry out of which they grew,” Crooks explained.

“Residents of MHEs – or ‘land lease communities’, as they should be more properly called – own their own factory-made homes, and pay a ground rent to the estate operator.

“If a manufactured home owner chooses to leave the community, they can generally just sell their house to an incoming purchaser, who then takes on the land rental.”

Retirement villages, on the other hand, have diverse and often complex contractual models involving loan/licence or loan/lease agreements, ‘incoming contributions’, service and maintenance charges, and exit fees (also known as a deferred management fee).

Another advantage of MHEs for retirees is that they may be eligible for Commonwealth rent assistance (unavailable to retirement village residents because they don’t ‘rent’).

Large, fast-growing target markets

MHEs are increasingly popular not only because they are cheaper and simpler, but because they provide high levels of resort-style amenities, ranging from swimming pools and tennis courts to RV parking, gyms, hair salons, cafes and clubrooms.  Lifestyle is a major driver for the sector.

Resort Brokers also highlighted the fact that affordable housing and lifestyle needs are not limited to retirees.

Earlier this year, the Queensland Anti-Discrimination Commissioner decided the shortage of affordable housing meant the option offered by MHEs should not be restricted purely to older Australians.

“We can certainly see potential for growth of MHEs as affordable permanent housing solutions for a younger demographic,” Crooks said.

“Furthermore, any perception of MHEs as a low socio-economic option is rapidly changing as the new estates become more lifestyle focused, with higher quality factory-built homes that resemble bricks and mortar houses.”

High-yielding, capital light investments

For developers, investors and operators, there is plenty to make MHEs very attractive.

“Once sites are leased, they offer stable, ongoing income streams, frequently underpinned by government rental assistance,” Crooks said.

“Development is low-risk and capital light, with attractive returns and CPI-indexed cash rents.  Sites, often in prime coastal locations and on the outskirts of metropolitan centres, represent land banks with cashflow.”

Little wonder, as the market evolves and matures, MHEs are an asset class on the rise.

“Up until now, MHE developers and operators have targeted existing caravan park sites because appropriate zoning is already in place,” she said.

“But, as the sector grows, suitable greenfield sites will be keenly sought for MHE development.”

Resort Brokers Australia has handled a number of sales to MHE developers and operators on behalf of caravan park, mixed-use and greenfield site owners, and is also working to facilitate working partnerships between owners, investors, operators and developers in the sector.

The Urban Developer is proud to partner with Resort Brokers to deliver this article to you. In doing so, we can continue to publish our free daily news, information, insights and opinion to you, our valued readers.

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