This new retirement option could bring country living to the inner city

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Over the past 20 years, land lease communities have evolved from cabins in caravan parks to offering a selection of accommodation and amenities – all the way from the super affordable to luxury resort style living (with a price tag to match).

And recently, in a move set to revolutionise the sector, the first vertical land lease community has been approved on the Gold Coast.

A land lease community at Buderim in Queensland.

The legal and financial structure of land lease communities allows residents to buy their home and rent the land on which it sits. The land needed for the homes and the amenities (many have clubhouses, bowling greens, pools and cinemas) has meant that these communities have been on the urban fringe or in regional locations.

The ability to build vertical communities will open up opportunities closer to city centres. Although vertical communities may look more like apartments than caravans, the homes or apartments will still need to be demountable to meet the legislative requirements.

The unique financial structure of land lease communities means that for calculating the pension, residents are homeowners with their home an exempt asset, and they can qualify for Commonwealth rent assistance of up to $211 per fortnight on top of their pension because they rent the land on which their home sits.

The site fees are normally payable as long as your home is on the land, which includes after you move out but are waiting for your home to sell. While your home can technically be demounted, doing so is not a cheap exercise with many homes needing to be cut up into two or three pieces, services disconnected and then reassembled and connected in a new location.

Moreover, much of the value of the home is in the community in which it sits. Removing it is likely to cause a significant loss in value on top of the cost.

Many residents of land lease communities are attracted by the modern homes, the amenities and the social connections they offer. Financially they typically offer a basic model – you buy the home and lease the land with no stamp duty upfront or exit fees when you leave.

While some homes in these communities have seen significant capital growth, others have seen delays in selling and capital losses. Unlike retirement villages the operator can profit from the site fees and there is no guaranteed buyback if your home doesn’t sell.

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