You've got more options than you think when it comes to downsizing.
The choice between a retirement village and buying another property on the open market isn't just about bricks and mortar. It's about how you want to live, what you want to control, and what you're willing to trade for convenience or freedom. Both paths can work, but they suit very different priorities.
What You Actually Own in a Retirement Village
Most retirement villages operate on a lease or licence model, not freehold ownership. You pay an entry cost, sometimes called an ingoing contribution, and live in the unit under a contract that gives you occupancy rights. When you leave or pass away, the village sells the unit and you or your estate receives a portion of the sale price, minus exit fees and sometimes a share of any capital loss.
Consider someone downsizing from a family home in the inner suburbs who pays $450,000 to enter a retirement village. They might live there for eight years, then move into aged care. When the unit is sold, the village deducts a deferred management fee, often calculated as a percentage per year of occupancy, plus refurbishment costs and sometimes marketing fees. The amount returned to the estate could be significantly lower than the entry cost, even if property values have risen in that time.
This isn't ownership in the traditional sense. You don't build equity, and you can't leverage the property or pass it directly to your children. What you gain is access to communal facilities, social activities, and often an on-site manager. If those services matter to you and you're comfortable with the financial structure, it can be a fair exchange. If you want to retain control of your asset and preserve capital for your family, it probably isn't.
The Real Cost of Village Living
Retirement villages charge ongoing fees on top of the entry cost. These typically include a monthly service fee covering maintenance of common areas, building insurance, and access to facilities like gyms, pools, or community centres. Some villages also charge a separate general services fee.
These fees can range from $200 to $800 per month depending on the village and the level of service provided. They're not optional, and they tend to increase annually in line with CPI or the village's operating costs. In our experience, people underestimate how much these ongoing costs add up over a decade or more, particularly if they're also running a car and managing health expenses.
When you buy a property on the open market, you're responsible for strata fees if it's an apartment or townhouse, plus council rates and your own building insurance. But you control those costs more directly, and you're not locked into a contract that dictates how much you pay or when fees increase. You also retain the option to sell when you choose and keep the full proceeds, minus selling costs and any capital gains tax if applicable.
Exit Fees and Deferred Management Costs
The deferred management fee is where retirement villages recoup much of their revenue. It's usually calculated as a percentage of either the entry cost or the sale price, accruing for each year you live in the village, often capped at a maximum percentage after a set number of years.
A common structure might be 5% per year for up to ten years, capped at 50% of the ingoing contribution or sale price. So if you paid $400,000 to enter and stayed for six years, the village could take 30% of the sale proceeds, plus refurbishment costs and any other fees outlined in the contract. If the unit sells for $420,000, the deferred fee alone could be $126,000, leaving $294,000 before other deductions.
Some villages also charge an exit fee on top of the deferred management fee, or they take a share of any capital gain. The contracts vary widely, and they're often complex. Reading the disclosure statement carefully, and having a solicitor review it before you commit, is not optional. We regularly see people who didn't understand what they were signing until they tried to leave.
What Open Market Downsizing Gives You
Buying a villa, townhouse, or apartment on the open market means you own the property outright, or you hold it with a mortgage that you can pay down or refinance as you choose. You can renovate, rent it out, sell it whenever you like, or leave it to your children without exit fees or deferred charges.
You're also buying in the broader property market, which historically appreciates over time in most Australian cities. A downsizer property purchased in an established suburb with good infrastructure and transport links can grow in value and give you flexibility later if your circumstances change. If you decide to move into aged care or closer to family, you sell and keep the proceeds.
The trade-off is that you don't get the built-in community or on-site services that retirement villages offer. You arrange your own maintenance, manage your own strata committee if applicable, and create your own social connections. For some people, that's liberating. For others, it's less appealing than the ready-made structure of village life.
A buyers agent specialising in downsizing can help identify properties that suit your mobility, lifestyle, and budget, and negotiate the purchase on your behalf so you're not competing at auctions or dealing with agents who don't understand what you're looking for.
Flexibility and Control Over Your Timeline
Retirement villages often have long waiting lists, particularly for popular locations or specific unit types. You might wait months or even years for the right villa to become available, and when it does, you're expected to commit quickly. The timeline is largely out of your hands.
Buying on the open market gives you control over when you move, where you buy, and how long you take to make a decision. You can inspect multiple properties, compare locations, and move when you're ready, not when a unit happens to become available. If your priority is staying in a particular suburb close to family, or if you want a ground-floor apartment with a north-facing courtyard, you can search until you find it.
That flexibility extends to your financial planning as well. You can sell your family home and buy the downsizer property in a timeframe that suits you, rather than coordinating settlement around a village entry date that might not align with your sale.
Social and Lifestyle Considerations
Retirement villages are designed around community. There are organised activities, shared dining options in some villages, and neighbours who are broadly at the same life stage. If you're someone who thrives on social interaction and wants that built into your daily environment, it can be genuinely appealing.
But it's not for everyone. Some people find the social expectation intrusive or prefer to live more independently. And not all villages suit all personalities. The culture of a village matters as much as the physical facilities, and that's hard to assess from a single inspection or glossy brochure.
When you downsize into a property on the open market, you create your own social life. You might join local clubs, stay connected with existing friends, or become part of a community group. The structure isn't provided for you, but the freedom to shape it yourself can be part of the appeal.
How to Decide Which Path Suits You
Start by being honest about what you value. If financial security and asset control are priorities, and you want to preserve capital for your family or your own future care, buying on the open market usually makes more sense. If community, convenience, and on-site services matter more than capital growth, and you're comfortable with the financial model, a retirement village might suit you.
Look at the numbers carefully. Get a solicitor to review any retirement village contract before you sign, and compare the total cost of village living over ten or fifteen years against buying a property outright. Factor in ongoing fees, exit fees, and what you or your estate would receive if you left the village after five, ten, or fifteen years.
If you're leaning towards the open market but aren't sure where to start, defining your buyer brief with someone who understands downsizer priorities can clarify what you're actually looking for and how to find it without wasting time on properties that don't fit.
Call one of our team or book an appointment at a time that works for you. We'll talk through what you want from this next chapter and help you find a property that supports it.
Frequently Asked Questions
Do you own the property in a retirement village?
Most retirement villages operate on a lease or licence model, not freehold ownership. You pay an entry cost for occupancy rights, and when you leave, the village sells the unit and returns a portion of the proceeds minus exit fees and deferred management charges.
What are deferred management fees in retirement villages?
Deferred management fees are ongoing charges that accrue each year you live in a retirement village, often calculated as a percentage of your entry cost or the sale price. These fees are deducted when you leave, and can reach up to 50% of the sale proceeds depending on the contract.
What are the ongoing costs of living in a retirement village?
Retirement villages charge monthly service fees, typically ranging from $200 to $800, covering maintenance, insurance, and access to facilities. These fees increase annually and are separate from the entry cost and exit fees.
Can I sell my retirement village unit whenever I want?
You can leave a retirement village, but the village manages the sale of the unit, not you. The timeline is controlled by the village, and you receive the proceeds minus deferred fees, refurbishment costs, and other charges outlined in your contract.
What are the advantages of downsizing on the open market instead of a retirement village?
Buying on the open market gives you full ownership, control over when you sell, and the ability to retain all capital growth. You can renovate, rent out, or leave the property to your family without exit fees or deferred management charges.
