Over 620,000 over 65s have considered downsizing, but cannot find suitable alternative accommodation. As the baby boomer generation enjoyed a period of unprecedented wealth they were able to afford sizeable houses. Now, as that generation enters retirement, an increasing number are finding it difficult to maintain their house and are therefore considering downsizing.
Research from equity release advisory firm Key Retirement found that a third of homeowners over the age of 65 are considering moving to a smaller home but have found there are limited options. The knock-on effect has meant that young families are unable to purchase homes large enough and the price of the available stock is being pushed up.
Despite the pressing need for homes purpose built for retirement only 7,000 were built in 2017, meaning it is the most undersupplied sector in the housing market. In contrast, Demos have suggested that 30,000 homes need to be built to meet the current demand, and that this could have a positive effect on the rest of the housing chain. The lack of available stock in the senior sector will only be exacerbated as more people enter retirement.
Benefits of downsizing
Downsizing can work for over 65s looking to release equity, perhaps to gift to their children or simply to enjoy life with. Many over 65s want to enjoy their retirement and visit places they did not have the time to go to when they were working, but many cannot because their equity is tied up in their home. Downsizing can free up available funds so that they can travel the world if they so wish. It could also be the case that the home they are occupying is simply too large to maintain now and moving into something more manageable would mean they are free to pursue other interests and hobbies. According to Demos, polling in 2017 revealed that an older person estimated they could release as much as £80,000 in equity if they were to downsize.
The benefits of downsizing are not only financial
Aside from the financial rewards of downsizing, there are also many overlooked benefits. Retirement homes are specifically designed with an elderly resident in mind. This means that stairlifts, wider corridors and even surfaces are used to minimise the possibility of falls or accidents. 85% over 55s living in retirement villages and homes felt a sense of community, compared with just 49% of those still living in their own home, as per research conducted by Demos. Regular activities held in retirement homes such as wine tasting, fine dining and days out to visit the local area really held cultivate a sense of community. Perhaps one of the most beneficial aspects of retirement communities is that it relieves pressure on the National Health Service and frees up hospital beds. After urgent hospital visits, retirement property already has the necessary adaptations to more readily accept patients back once they have been treated, as opposed to a residential home which may require additional facilities to ensure proper care of the patient.
Where are there opportunities for investors in the downsizing crisis?
Due to the lack of options available for over 65s, existing accommodation is extremely sought after. Excellent occupancy rates have had a positive effect on the rental yields that can be achieved – up to 10% in some cases.
These investment options are located where there are high numbers of over 65s, for example in the south west of England or rural parts of the north west and north east. This is strategically important because a) the elderly may not want to move too far from where they had lived as they may have family or an existing network of friends close by and b) to ensure a healthy demand for accommodation. There would be little point in developing a 100-bed retirement property in a busy city where <15% of the locals would be eligible to inhabit it.
Such examples of luxury retirement homes in the UK include Lindors. Located in the Wye Valley region in Gloucestershire, UK; the development will include an onsite private cinema, spa facilities and a health and beauty salon. Personal chefs will prepare fresh food every day, and there is also the opportunity to partake in wine tasting and fine dining events. As it is in the Wye Valley region, there will also be plenty of opportunities to explore the surrounding area, which is an Area of Outstanding Natural Beauty and home to some of the most dramatic landscapes in the UK.
Suites in Lindors start from R1.25m and a 10% return is guaranteed for ten years. As the developer puts a management company in place, this investment is completely hands-off and therefore suitable for the busy South African investor who would not be able to oversee the running of it. There are multiple buy-back options from year 5 at 110% all the way to year 10 at 125%, in case investors wish to place their capital elsewhere.
This is an excellent opportunity to help relieve the downsizing pressure in the UK, whilst also making excellent returns. After interest rates were cut to record lows in March 2018, many South Africans are finding they are not making much money from their savings; could this be another avenue to explore?
Download the retirement home investment guide to find out more.
Register here to qualify for this U.K retirement property seminar at which you learn about the best areas for investment, examples of recent case studies, new retirement property launches, tax implications and the purchase process. They will also be in Johannesburg, Cape Town and Durban from the 17th – 27th July 2018 conducting one to one consultations.
One Touch Property Investment experts will also be attending the Property Buyer Show in Durban along with Estate Living.