Retirement Living properties set to double in value in just over a decade, says JLL
Under supply of retirement living accommodation in the mid to upper market tiers and increase in life expectancy is driving strong re-sale and price growth in the retirement living market, according to real estate investment advisors JLL.
Analysis was undertaken by the firm into the performance of properties in the housing with care market, managed by members of the Associated Retirement Community Operators (ARCO) over the past 22 years. This form of housing comprises self-contained units with communal facilities and on-site care. It is the fastest growing form of housing in the retirement living sector.
The key finding is that this form of retirement living accommodation tends to follow UK house price growth. Since 1995 the compound growth rate for housing with care has been 6.0%, with an average price difference between sales of just over £41,000. JLL predicts that based on this, a retirement home would double in value in 12 years.
Analysis into re-sales in the sector highlighted that 80% of sales from 1995 have seen an increase in price, tracking wider house price movements.
The South East saw the highest number of sales followed by the West Midlands, the North West and the South West. London, unsurprisingly, saw the highest growth in prices, but the South West and East of England bettered the South East in terms of average price growth.
JLL estimates that almost 80% of over 65s could be classified as mid to high affluence by 2025, largely as a result of house price wealth. Already one in six of the over 65 population has a household wealth of in excess of £1million. At present, 75% of the existing market is provided on an affordable tenure, meaning that there is a significant gap in the market for new stock aimed at the mid to higher ends of the market. Housing equity is the main driver of household wealth and with JLL expecting housing wealth to become a larger proportion of wealth in future generations, the gap in the upper market is set to continue.
Philip Schmid, director in JLL’s retirement living team, commented: “The housing with care market currently sits at 0.72% in the UK compared to 5% in countries like Australia and New Zealand. The single biggest challenge facing older people in the UK is a complete lack of appropriate housing choices to suit their lifestyle, care or support needs as they age. Our clients want to invest in the sector and evidence like this helps to show the long term performance encouraging investment and improving the choice and accommodation for our ageing population.”
Anthony Oldfield, director in JLL’s retirement living team, added “While the untapped opportunities here is good news for owners, investors and developers, further growth in this sector will also ease strain on our overstretched health and social care service and could release thousands of family sized homes back into the market.
“At a time when the funding and future of the NHS and the housing market are at the top of the political agenda it makes social, political and economic sense to incentivise greater development and diversity within the retirement living market.”
Michael Voges, executive director of ARCO (Associated Retirement Community Operators), added: “The research confirms what we are seeing on the ground – housing-with-care properties continue to be in high demand. Our members focus on more than just bricks and mortar. They also deliver services designed to enable older people to stay independent for as long as possible. The data shows that with the mix of services and facilities, retirement communities are well placed to retain or increase their value in the long term.”
- The full report can be down loaded at: http://viewer.zmags.com/publication/01084122#/01084122/1