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What can the retirement sector learn from student housing?

Learning lessons from the student housing sector could help unlock the potential of the retirement housing industry.

You are here: Home / Market News / What can the retirement sector learn from student housing?

7th February 2019 by admin

Student accommodation has undergone a radical transformation over the past 15 years and is now a thriving market, with more than 31,000 units delivered in 2018. The sector has grown 50% over the last 10 years, taking it to 610,000 units.

In contrast, supply remains unaddressed for retirement communities. It is estimated that just 6,000 retirement units will have come to market in 2018 versus demand for 20,000 to 30,000 units a year, according to Knight Frank and Savills.

Growth in the student sector has also been achieved without mass public subsidy. Instead, 77% of new student development projects were supplied by the private sector in 2018 in a market with transactions worth £3bn in that year alone.

The key driver to increasing supply of student housing has been the involvement of long-term institutional investors that see the yield potential from the student rental market. This has transformed student housing into a major investment asset class.

So could there be potential for similar transformation in the retirement sector?

The traditional business model for retirement property was built on a single tenure of outright purchase with 999-year leases but this model lacks flexibility, particularly as retirees want to use their equity on maintaining a high standard of living. Many retirement builders are now beginning to offer more choice, such as multi-tenure offerings as well as rental or shared-ownership options.

There is even a possibility of a ‘rent-to-rent’ model whereby retirees rent out their current owned property and use the proceeds to pay for a smaller rental retirement property, using any additional income to help pay for living or care costs. This has the added benefit of helping people fund their long-term support needs.

Developers are also looking at the affordability of their product offering and are exploring a more streamlined, contemporary and compact range of designs that can be fabricated to drive mass-market appeal.

Achieving this will bring another key parallel with the student market: the potential of modern methods of construction (MMC). MMC works well for standardised and repeatable layouts. It reduces build costs, speeds up development and is both high quality and environmentally friendly.

These are not complex solutions. Learning lessons from the student housing sector could help unlock the potential of the retirement housing industry. They have precedents and proven investor support and offer the flexibility that customers and investors want. Learning these lessons would also deliver the specialist housing that so many of our ageing population so desperately need.

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