Retirement village sector expert Jenny Baldwin podcast lays it out. "You're not buying any property rights. It's simply a contractual right for you to stay in that unit for as long as you want to." Pictured is Hamilton's Awatere Village.

Moving into a retirement village can involve handing over hundreds of thousands – or even millions – of dollars, but it does not buy you a house.

“In most retirement villages in New Zealand, you’re buying an occupation right agreement,” retirement village sector expert and Anthony Harper partner Jenny Baldwintold Nadine Higgins on The Prosperity Project podcast.

“You’re not buying any property rights. It’s simply a contractual right for you to stay in that unit for as long as you want to.”

That distinction has significant financial consequences.

Residents generally pay a weekly or monthly fee towards rates, insurance, maintenance, staffing and village facilities. Those fees may be fixed, or they will rise in line with inflation, New Zealand Superannuation or the village’s actual costs.

When residents leave, they will usually receive the amount they originally paid, minus a deferred management fee – commonly around 30%.

In addition, for the majority of retirement villages, “the operator keeps any capital gain”, Baldwin says.

There are exceptions, with some villages now offering residents a share of any gain. However, Baldwin says the flipside of the more common model is that residents are not generally exposed to losses if the unit falls in value.

Because the model differs so much from home ownership, it needs to be assessed carefully. It may preserve less wealth for a resident’s estate or future care, but it buys facilities, company, security and freedom from maintaining a large property.

Baldwin encourages prospective residents to discuss the move with their family members, as well as obtaining the independent legal advice that’s required before signing an occupation right agreement.

That means everyone understands the arrangement and why it appeals – because it’s not solely a financial decision.

“For a lot of people who are moving in, it’s about having the facilities that they want, having all of the recreational services, things to do, clubs to join, having people around,” Baldwin says.