Costs of transferring within a village
Alice and Jack entered a village three years ago. It offered different levels of accommodation and care so they could be assured of staying there and being cared for, for the rest of their lives.
They purchased the right to live in an independent villa for $160,000. This was all the money they had from the sale of their house. At that time an apartment in the village cost $100,000. They planned to move to an apartment as their needs changed, and still have money left over.
When the time came to move, their villa was now worth $250,000. However, Alice and Jack found they would receive only $130,000 from its sale due to deductions from the original purchase price and because they would not receive any share in its capital gain.
The key point to this story is that to move into a smaller apartment or to buy outside the village they have to buy in today’s market but are not receiving the return from their villa in today’s values.
In addition, they were $30,000 short of the cost of the apartment as it was now worth $160,000. Their dream of downsizing as their needs changed was not possible after all.
| How Alice and Jack's figures stack up | ||||
|---|---|---|---|---|
| Purchase price of villa | $160,000 | |||
| Purchase price of apartment | $100,000 | |||
| Villa worth three years later | $250,000 | |||
| Capital deduction + sales costs | $ 30,000 | |||
| Return to residents | $130,000 | |||
| Difference from sale price | $120,000 | |||
| Cost of apartment | $160,000 | |||
| Difference residents to pay | $ 30,000 | |||
Alice and Jack wished that they had asked more questions before they entered the village about the costs of buying and selling a unit, including transferring to an apartment. If they had known that they would not get a share in the capital gain they would have considered other options. They also found out that if the market had dropped they would have been liable for any capital loss.
