Property Week’s third Retirement Living conference last week took place at a critical juncture for the sector.
On the one hand, the UK’s rapidly ageing population means that the scope for growth is enormous. The arrival of big-name investors such as AXA Investment Managers, L&G Capital and Goldman Sachs is testament to this potential.
On the other hand, retirement living developers have been hit by the weak housing market and have received little help from the government.
The Retirement Living conference, which was held at the head office of the Royal Institute of British Architects in central London, explored how the sector is responding to the challenges and how best to unlock its potential.
Here, Property Week takes a look at four of the key takeaways from the event:
The growth challenge
JLL healthcare director Anthony Oldfield outlined the scale of the challenge facing the sector. Development of retirement homes with care would have to be ramped up from about 1.9% to 6.6% of total housebuilding in order to hit the target set by trade body Arco earlier this year to increase the number of people living in retirement communities from about 75,000 to 250,000 by 2030, he said.
Experts agreed that replicating the growth seen in the student housing sector would be difficult because it takes more to persuade retirees to sell up and move into retirement housing than it does to attract students to a student housing scheme.
“It is a life event in a way that choosing university accommodation isn’t,” said Andrew Ovey, head of healthcare at AXA Investment Managers.
Rental model gains traction
Birchgrove managing director Honor Barratt described the process of sourcing debt for the company’s first schemes as “tortuous”. Banks were sceptical that Birchgrove would succeed in persuading retired homeowners to rent. It is still too early to assess how successful Birchgrove’s rental-only model will be – the company’s first scheme in Sidcup is currently being built.
However, there is growing evidence that the lenders Barratt spoke to were over-cautious and that many retirees in the UK would be happy to rent. John Roddy from Charterpoint Senior Living said Belong, which offers a free choice of tenure options for its assisted living accommodation, found that a significant majority of over-80s preferred private rent. And more and more developers and operators are looking to offer a rental option.
McCarthy & Stone has started offering some homes for rent and Phil Bayliss, head of later living at L&G Capital, said it expected about 10% to 15% of its retirement housing would be for rent.
Calls for more government support
Government proposals to exempt the industry from its crackdown on ground rents were broadly welcomed. Andrew Burgess, group land and planning director at Churchill Retirement, said ground rents were important to its business model to fund provision of communal space and that the industry had not been guilty of the bad practice the crackdown was designed to stamp out.
However, there were calls for the government to do more to support the sector. Carl Dyer, head of planning at Irwin Mitchell, advocated the creation of a new planning use class for retirement living with no affordable housing provision.
Victoria Wallace, an associate director in the healthcare team at Savills, added that the creation of regulations specific to retirement living had been a key factor behind the growth of the sector in New Zealand.
McCarthy & Stone’s new strategy
David Bridges, McCarthy & Stone’s group marketing and customer experience director, was frank about the difficulties the company has been facing. He described how the Brexit vote had “log-jammed” the market and explained that in the face of falling sales rates, the company had decided to reduce its construction target from 3,000 units a year to 2,100 as part of a strategic review in September. He also said it was looking to expand its care offering and become more flexible, allowing people to choose between different levels of service and different tenures.