The retirement property market is bewildering. Here is a sector that has an estimated 3.3m customers queuing up and ready to downsize to more suitable accommodation, yet only around 7,000 homes a year are built.
What’s more, these customers have money; with many benefitting from the boom in house prices and who can expect to retain a large chunk of equity after trading down.
This over-65 age group is also projected to grow by 20 per cent between now and 2014, five times faster than the working-age population. According to a recent report by Savills, just 90,000 retirees downsize each year, meaning that there are around 2.9million homes that are now too large for purpose and could be used instead by families.
So why is there such a shortage?
Developers have been wary, with the vast majority of retirement homes built by just a few specialist developers, such as Churchill and Audley, who have a much clearer understanding of the market place. Retirees, on the whole, want to buy rather than rent. They also want spacious, upmarket accommodation, with a spare room or two, particularly as most are dripping in equity.
This void is seriously distorting the housing market, preventing family homes being sold to the next generation, which in turn also affects first time buyers down the line.
Into this market is stepping Legal & General (L&G) which has just paid £40m for Inspired Villages, a developer of upmarket retirement villages. The insurer already has a foothold in the housing market, with a stake in Cala Homes and a stake in the development of the world’s largest prefabricated modular homes factory. L&G believes that there is substantial demand for retirement homes that will prove to be lucrative. Given the numbers, what’s not to believe?
No doubt, there will be many more entrants into the retirement housing sector, including mainstream builders, hedge funds and large private investors, who also see the potential upside from this affluent, but largely ignored, grey market.