Retirement homes and/or care facilities are not for everyone. Whilst these offer some of the best environments for the elderly, specifically designed to address physical mobility, lack of transport, security, and healthcare for example, there are many who resist such a move, and their decision needs to be respected, assuming that is that they are in a stable frame of mind.
Many elderly people fear they may find themselves overwhelmed by these safe havens, that they will begin to age far quicker, will lose their privacy and autonomy, and may be abandoned by their family, and this despite innumerable tours of estates that can prove otherwise. The most common phobia, however, is moving to an unfamiliar environment, the root cause of which can be attributed to fear of change and having lived, or only lived, in their home for a long time which provides a sense of comfort and safety.
When it is evident that the home has become too burdensome to manage, be that financially or physically, it is time to consider a move. The question is whether the senior citizen/s should be buying or renting?
Buying a new home if a bond is required is really not viable and few banks will provide a home loan over age 65. However, financial institutions do make allowances and evaluate each individual on a case by case basis. If the existing property is bond free, a sale will likely realise a price that will allow the owner to buy a smaller property yet still have money left over to add to their retirement income.
What is a factor is basic monthly costs, bearing in mind that these figures do not account for interest rate modifications, nor cost-of-living increases. This includes an average of R3000 for groceries, R5500 for rental, R600 for utilities, R500 for transport, R500 for data costs, R1500 for ad hoc expenses. Bear in mind that the rounded figure of R12 000 a month, does not include any other commitments such as pet care, home cleaning, medical expenses or savings and other accounts.
Assuming the senior citizen’s property sale realises a profit of R2-million, the senior citizen could afford to stay in a rented property for 166 months.
If the senior citizen buys a property of R1-million inclusive of all transfer and moving fees, there remains R1-million profit. Not having to pay rental means the cost of living as per our example is reduced to R6500. This translates into 153 months worth of living, not accounting for levies, rates etc. However, the senior citizen still holds an asset that can be sold in an emergency, which will likely realise profit in the future. It can also be rented out.
Weighing in on this subject is Founder and CEO of Tyson Properties; Chris Tyson, and Richard Gray, CEO of Harcourt’s Real Estate.
Chris Tyson
The current market is such that whether elderly or not, more people are wanting or needing to downscale, and in most cases they have left it very late and in so run the risk of their current property being outdated and not as well maintained.
This often negatively affects the price of the property. Also moving into newer units with facilities such as the elderly need is costly and most of the reputable ones have waiting lists. If a person sold sooner and moved to a property that caters for over 55 years, they would still have had a minimum of 10 years to pay off a bond while they were still working.
What we learn from this is that age and property ownership is time-sensitive. Planning ahead means such decisions are far less stressful when the elderly are not forced into living circumstances that aren’t their first choice, especially if leaving it to the point where they are in need of care.
Another option for the elderly is a property that caters for the extended family where the parent or parents assist their children in buying a home that allows the parents to also live on the property. Not only does the family save costs but the entire family benefits financially, and from a lifestyle perspective. We are seeing what used to be garden cottages becoming smaller second homes on the property.
Richard Gray
These decisions are extremely complex because many considerations and factors come into play. Senior citizens in their “Golden Years” are advised to remember that owning a property comes with expenses such as municipal rates and taxes, property maintenance, insurance etc, many of which are not part of a tenant’s responsibility and expenses when renting .
The upside of owning one’s own property though is the stability it brings versus being in the hands of a landlord when renting and possibly be forced to move if the landlord decides to sell. This can cause undesired uprooting, relocation, financial distress, and emotional upheaval, possibly even a few times during these Golden Years.
Tying the bulk of one’s wealth into buying a property while not generating any income except from interest earned, can also cause cash flow constraints. If there are no family or friends that are in a position to help out financially in a moment of need, this can put a senior citizen in a very difficult financial position.
Renting, however, provides liquidity, which is an important consideration for all senior citizens. Investing the proceeds of the sale of ones property in a fixed deposit interest bearing investment account will earn interest that will pay towards the monthly expenses and will keep the senior citizen liquid in case of an unforeseen emergency that requires substantial funding. When renting, it is important to consider though annual monthly rent increases, which over a period of 15 years, may double the monthly rent amount, based on the annual national rental average increase of 7%-8% per annum.
During one’s twilight years, medical care, 24-hour support and other considerations become a lot more crucial. When not living in a retirement village where there are frail care facilities, professional full time home care will likely be needed, which can be extremely expensive.
Ultimately, there is no one-size-fits-all answer, and the decision should be based on the individual's unique circumstances and priorities. It may be helpful for the senior citizen to consult with financial advisors, family members, and other trusted professionals to weigh the pros and cons of each option and make an informed decision that aligns with their goals and preferences.
