The implied monthly rent of Australian retirement village based on health adjusted life expectancy

Publication Type

Journal Article

Publication Date

7-2026

Abstract

Population aging has become a significant issue in many countries, including Australia. On the personal level, besides the longevity risk that a person outlives their own financial resources, there are also important social risks. To reduce loneliness and social isolation, many older Australian adults seek “age friendly” accommodation in the form of a retirement village. The demand for such accommodation has increased, alongside greater supply in the market. Retirement village contracts are often complex and effectively involve the resident paying the rent for the remaining healthy lifespan upfront at the time of entry. The right to reside terminates if the resident’s health declines and independent living is no longer possible. The resident’s length of stay is therefore a critical factor in assessing the value of the accommodation service and how the value compares to what has been paid. In this paper, we propose an annuity metric that quantifies the true retirement village cost. In particular, the average length of stay is estimated as the resident’s health adjusted life expectancy, which is computed with a modified version of Sullivan’s method using Australian mortality and disability data. We show that the proposed annuity metric can potentially serve as a useful assessment tool for prospective buyers of retirement villages.

Keywords

Health adjusted life expectancy, Retirement village, Implied monthly rent

Discipline

Behavioral Economics | Public Economics

Research Areas

Applied Microeconomics

Publication

European Actuarial Journal

First Page

1

Last Page

26

ISSN

2190-9733

Identifier

10.1007/s13385-026-00465-8

Additional URL

https://doi.org/10.1007/s13385-026-00465-8

This document is currently not available here.

Share

COinS