(Bloomberg) — John Purnell, 75, and his wife Patricia, 72, moved into a factory-built house in a converted trailer park west of Sydney this year, eschewing traditional retirement communities and other homes in the area.
“Retirement villages are quite expensive,” Patricia, a former payroll clerk at a seniors facility, said in an interview in their AU$254,000 (US$224,053) 160-square-meter (1,722-square-foot) air-conditioned home, which features built-in wardrobes, a separate laundry cupboard and a carport. Nearby houses had minimum price tags of about AU$350,000 and needed a further AU$50,000 of work, she said.
Australia’s expanding ranks of retirees, faced with declining affordability of housing and inadequate savings, are set to boost demand for cheaper manufactured homes by as much as 41 percent, according to Colliers International U.K. Plc. Investors are responding to the growth of the nascent market, with companies including Ingenia Communities Group and Alceon Group Pty, headed by former JPMorgan Chase & Co. banker Trevor Loewensohn, acquiring existing housing parks and sites to convert, and finance companies including GE Capital planning to start lending to operators.
There is “tremendous opportunity in manufactured housing,” said Jason Kougellis, managing director for Australia and New Zealand at GE Capital. They “provide an affordable solution for an aging population in a country that has some of the most expensive real estate in the world.”
GE Capital, which has lent $5 billion to manufactured housing operators in the U.S. and Canada, plans to start doing the same in Australia, Sydney-based Kougellis said.
If demand from people older than 50 for homes in caravan parks continues at the current rate, it would rise to 96,636 properties by 2021 from 76,897 in 2011, according to forecasts by Colliers. That number could surge to 108,118 if demand increases at a “moderate level,” as has happened in more mature overseas markets, according to the broker.
Unlike in the U.S., where trailer parks typically provide housing for low-income residents, in Australia they have historically been used as tourist accommodations. The Australian manufactured home parks often include amenities such as pools, recreation halls and barbecue areas, and many homes have porches and even small gardens.
The lack of mortgage financing for them in Australia also means that they’re restricted to retirees who are selling their homes and can pay cash.
The number of Australians more than 75 years old is set to rise by about 4 million between 2012 and 2060, according to a November report by the Productivity Commission, the government’s independent advisory body. It projects there’ll be more people older than 100 by 2100 than newborns that year.
The average retirement savings was AU$151,000 for men older than 66 and AU$133,000 for women, Deloitte LLP estimated in a June report. A “modest” lifestyle during retirement requires between AU$340,000 and AU$370,000, it said.
“The global financial crisis dealt a triple body blow to retirees” as savings shrank, low interest rates eroded incomes, and living costs rose, Deloitte said.
With the number of Australians more than 65 years old set to grow at double the rate of the total population, more retirees will turn to lower-priced options, according to Shane Nicholson, Sydney-based director of transaction services for health-care and retirement living at Colliers.
“Researchers have forecast that the number of people aged over 65 years in low-income private rentals will more than double by 2026” as Australia’s aged population grows at double the rate of the total population, Nicholson said. This makes lower-priced manufactured housing “the largest, fastest growing and least competitive band within the seniors living spectrum,” he said.
That only 5 percent of seniors now live in communities tailored to them also offers growth prospects, Nicholson said. That compares with about 12 percent in the U.S., he said.
Available senior housing can only accommodate about 10 percent of the 3.3 million Australians older than 65, according to a July 22 report by Patersons Securities Ltd.