How Retirement Living in Australian Manufactured Home Estates became an Industry

From caravan parks to desirable lifestyle estates. Retirement living in manufactured home estates has grown to be a significant industry housing thousands of older Australians.

Manufactured Home Estates (MHEs), also called Land Lease Communities, Residential Parks or Rental Parks, have become popular with retirees in Australia. In recent years, large investors have focused on the MHE industry based on an investment thesis of Australia’s ageing population and high housing costs. Retirement living in MHEs offers a lifestyle that suits the needs of retirees and prices of homes are (generally) cheaper than surrounding residential houses.

This history is summarised in the attached poster which shows when companies started developing and buying MHEs. Major events include commencing and opening new developments, plus purchases at the individual, portfolio and company level. This report outlines the growth of the industry, identifying major companies and trends.

Pre 2000: Quiet Growth

The commencement of retirement living in MHEs in the 1980s is considered to have started with the introduction in New South Wales (NSW) and Queensland of specialised legislation regulating their operations. Caravan parks had traditionally been affordable housing for retirees and people on a low income. This legislation legitimised and began formalising the relationship between operators and residents.

Permanent residents provided regular income with less management compared to tourism. The change was organic, as itinerant residents left, operators quietly converted caravan parks to “Permanents Only” MHEs. New estates were commenced which were amalgamated into later portfolios. Living Gems, Palm Lake Resorts, Lifestyle Communities and National Lifestyle Villages all had their commencement pre-2000.

2000 – 2013: The Rise of Branded Operators

This period saw the rise of operators with portfolios of MHEs under a brand-name. In addition to the four previously mentioned, Halcyon and Hampshire Villages entered the industry. Operators with a funds management background also started accumulating portfolios; these were amalgamated later. Operators increased their portfolios by purchasing existing caravan parks and upgrading them to MHEs and developing new estates.

This increased the population of people living in MHEs, which highlighted tensions between residents and operators. Increasing property values made caravan parks and MHEs attractive redevelopment sites. Closure of these resulted in a loss of affordable housing and emphasised the lack of tenure security for residents. NSW and Queensland reviewed and amended their legislation; South Australia, Western Australia and Victoria all introduced specialised legislation. New legislation did not prohibit redevelopment but made it more time-consuming and financially onerous for operators.

Greater tenure security helped retirement living in MHEs to become more upmarket. Obtaining finance to purchase a relocatable home was difficult, so most residents were retirees with some equity and/or savings. This group was much more likely to purchase upmarket homes when there was security of their investment. Operators responded with second-generation homes, which were larger, better quality with a cottage-like appearance.

2013 – Covid: New Entrants to the Industry

This was the period when large investors started targeting the industry and building portfolios. The ASX retained its importance in providing funds with the IPO of Gateway Lifestyle in 2015. This exposed the company to an on-market takeover from Hometown Australia which was successful in 2018. The existing listed operators, Ingenia, Lifestyle and Aspen, retained their presence and expanded their portfolios.

There was interest from international operators and investors with Sun Communities establishing a JV with Ingenia; Hometown Australia, funded from its US parent, taking over Gateway Lifestyle; and Blackstone providing funding to National Lifestyle Villages. Local entrants included GemLife, a spin-off from the established Living Gems, Avid Property Group and Lincoln Place.

Purchasing older caravan parks/MHEs and repositioning was originally a popular strategy, however this was not always successful. Increased legislative protection meant that relocating existing residents was time-consuming. For listed operators, reducing income, while spending capital was problematic.

Operators also focused on developing new estates improving their returns. Ongoing operations of an MHE provide an attractive return on capital, but development returns can be even more attractive. IRRs in excess of 25% were reported on new developments. Compared to retirement villages, MHEs were easier to develop with sites often cheaper and initial capital requirements lower. Operators that came from a property development background had the advantage of access to sites, including master planned estates. This new supply further increased the number of residents, with estimates of a doubling of resident population.

Strong house price growth during this time meant that retirees looking to downsize were increasingly wealthier. Operators responded with third generation homes, constructed in situ on concrete slabs and larger with quality fittings. This move upmarket was complemented by resort style community facilities that matched retirement villages.

Covid – Post Covid: More New Entrants

The Covid pandemic and the associated lockdowns highlighted the attractiveness of retirement living in MHEs, especially in lifestyle locations. Regional areas (generally) had fewer restrictions compared to capital cities, so residents were able to continue with activities. Their communal nature provided regular interaction within the restrictions of social distancing. This was a period of noticeable demand as retirees brought forward their relocation decisions.

Stockland and Mirvac, two large diversified listed property companies entered the industry. Stockland purchased Halcyon and a portfolio from GemLife, while Mirvac and Pacific Equity Partners took a majority position in Serenitas, formerly National Lifestyle Villages. Both these organisations have access to master planned estates to facilitate further development.

Not included in the poster are a number of operators who have more recently entered the industry. Some have extensive experience, others come from a property development and/or funds management background. These new entrants have further diversified the sources of funding to the industry. Many have their own financial backing, with other sources including private equity, syndicated lending and managed investment schemes. These new entrants are as follows.

·Providence Lifestyle Group, registered in 2021, has four lifestyle properties Haynes Resort, Henley Brook Resort, Mandurah Resort and Piara Waters Resort.

·Gannon Lifestyle Communities opened Moonta Bay Lifestyle Estate in 2018.

·Liven Communities, owned by fund manager GreenFort and private equity firm Gaw Capital, has two developments underway in Hervey Bay and Gympie in Queensland.

·Assembly Funds Management , backed by the Lowy Family Group, has announced a joint-venture with Elka Capital and has two sites in Victoria.

·Allira, owned by Adrian Puljich, has four developments underway in Queensland.

·Established Victorian developer, ID_Corp, launched their MHE brand, Next Living. Next Living was registered as a name and a company with ASIC in 2022.

·Macquarie Real Estate Partners Fund is reportedly seeking greenfield MHE developments on the Australian East Coast.

·Emblem Group with funding from CIX Capital, is marketing homes in a MHE in Benalla.

The focus on developing new estates positions MHEs within current debates on housing supply. Encouraging retirees to downsize to new homes frees up existing properties, which can alleviate high house prices driven by a lack of construction. MHEs can be developed more time and cost effectively than residential developments. Proposed development amounts to thousands of new sites and could double the size of the industry. Estimates of Australia’s housing undersupply are in excess of one million homes; the contribution from all these new MHEs is small in comparison. MHEs catering to retirees are part of a diverse housing mix which meets the heterogeneity of Australia’s population.

Conclusion

The industry has quietly grown from caravan parks to desirable Lifestyle Estates. This evolution has similarities with the retirement village industry, examined earlier in 2024. It started with original operators accumulating portfolios and establishing a brand presence. Followed by later arrivals purchasing existing caravan parks/MHEs and repositioning them, plus developing new properties and also establishing a brand presence. The MHE industry has largely avoided the financial turmoil experienced by the retirement village industry following the GFC. It will be interesting to see how the industry evolves over the next 5 – 10 years.

References

Sources include: ASX Company reports, ASIC filings, newspaper articles and industry websites.

Stantons Research