(Bloomberg) -- Park Jong-chul, an 85-year-old in Seoul, recently decided it was time to move to a retirement home to secure the help he and his wife are starting to need. After viewing a presentation for VL Le West, a high-end apartment for seniors being developed by the conglomerate Lotte, he’s ready to sign up for one of the few remaining rooms.
“This kind of senior home provides three meals a day,” he said, adding that it wasn’t too expensive considering what it costs to hire a housekeeper.
He joins a growing number of Korean retirees looking to spend their twilight years in self-paid retirement homes. In one of the world’s fastest-aging countries, these residences are emerging in popularity with the likes of Lotte and Hyundai investing billions of dollars on new projects.
Unlike nursing homes and assisted living facilities, such homes cater to people who can still go about their day activities independently but want services like meals and cleaning, as well as the company of other retirees. Few such properties existed in Korea until a few years ago because of traditional expectations that children should look after their aging parents.
As such homes don’t cater with people with medical conditions like dementia and aren’t subsidized by public insurance, they’re mainly for a rich minority — but a growing one. The wealth of Korea’s new retirees is at an all-time high, thanks to careers that overlapped with the country’s economic boom years.
At least nine major projects for private retirement homes have been announced in the country this year. That may not sound like much, but it’s the most of any year over the past decade, according to data compiled by Bloomberg. They’re also part of what analysts expect will be a 168 trillion won ($121 billion) “silver industry” by 2030 as a falling birthrate, urbanization and surging personal wealth spawn new products and services aimed at older Koreans.
“There’s definitely demand for this new type of senior housing,” said Choi Younghak, a director at Igis Asset Management, a Seoul-based real estate fund with 65 trillion won ($47 billion) in assets under management. He cited strong interest among wealthier retirees who can’t, or don’t want to, live with their adult children.
Igis is currently planning a private, senior residence in Seoul, and is also in talks with multiple overseas investors for other projects. The asset manager will have a 20% stake in the project, which has raised 63 billion won as a bridge loan from investors including 33.5 billion won guaranteed by Hyundai Engineering & Construction Co. Hyundai, which has a 30% stake, will be in charge of construction. Local developer MGRV Inc., which holds a 30% stake, will be responsible for operating it.
One of the early examples of these high-end residences was Classic 500, built in 2009 and run by the Konkuk University Foundation, a fund connected to one of the country’s top private universities. The twin high-rise building includes a spacious gym, spa and pool as well as a shuttle bus service to a golf course.
For years, few followed, partly because of the cost: couples pay a 1 billion won deposit and a monthly rent of around 4 million won, in addition to other expenses including meals. But it’s become a model for high-end retirement homes that developers say are increasingly in demand.
The Signum Haus, which runs a luxury, 230-unit facility in upscale Gangnam, plans to open a similar facility in Cheongna International City in the next few months. The rooms will have hardwood floors and those on upper levels will overlook the city, while common facilities are set to include indoor golf practice ranges, a movie theater, meditation room and a restaurant.
Marketing material for the 15-story VL Le West show it will look nothing like traditional nursing homes in the country. Rooms will have floor-to-ceiling windows and the plan includes a cinema and concierge services. Despite the $1 million deposit and $1,500 average monthly rent, most of its 810 rooms have already been sold, according to Lotte. Lhour, a luxury senior home to be built by Hanwha Engineering & Construction Corp and operated by Hotel Lotte in the coastal city of Busan, quickly sold out last year.
Targeting the wealthy, however, comes with risks. If real estate prices fall as some economists predict, fewer people will be able to finance a move into luxury retirement homes by selling their current homes. Some analysts also warn that developers may be overestimating the wealth of the soon-to-retire generation while underestimating running costs including rising labor costs — a major problem affecting retirement and care home businesses in Japan, another fast-aging society.
“Due to low birth rates, South Korea will suffer from a lack of workers at nursing homes more seriously than in Japan,” said Hyeri Shin, an associate professor for gerontology at Kyunghee University.
Park is hoping to sell his home in Seoul before moving in. Construction hasn’t yet started, and he’s been told it will take a few years before it’s ready for buyers to live there.
“We heard it might take two or three years,” he said, then laughed. “I might die while I wait.”
--With assistance from Sam Kim, Eddy Duan and Kevin Dharmawan.
©2024 Bloomberg L.P.
