A well-functioning housing system needs movement at both ends to help retirees out of oversized homes into quality retirement living to benefit all.
This article was written by Russell Smith, Sales & Marketing Director of Silverbridge Properties, and published in the July 2024 issue of Showhouse magazine.
The UK housing market has been on somewhat of a journey over the last two years. As you read this, a new labour government, has, in all likelihood, been voted in and so the question for us is, where will it go next and how that impacts on the retirement housing sector?
For us, at Silverbridge Properties, 2024 has been steady and largely uneventful, which comes as welcome relief after a particularly turbulent four years. Demand for retirement housing is still strong, although there is still a great deal of cautiousness from buyers. Meanwhile it’s taking, on average, much longer to sell on the open market, with the result that we’re transacting around ten percent more part exchange deals than we did last year – and, unsurprisingly, substantially more than in 2022. A year that many of us in the property market will want to forget.
Seismic shocks
After hitting a record high in August 2022, house prices, plummeted in the aftermath of Liz Truss’s disastrous mini-Budget. Almost immediately, mortgage interest rates shot up resulting in buyers abandoning the housing market.
Despite rising mortgage rates delivering a 20% hit to buying power and the cost-of-living crisis, one million homes were sold in 2023. According to a Rightmove report in June of this year, agreed sales were up by 6% year-on-year and demand from buyers was up by 5%.
With buyers slowly returning to the market, we now await a first cut in rates. This may happen in August, with a 0.25% drop, and possibly two further reductions later this year, with bank rates settling at around 3.5% by the end of 2025.
Green shoots of growth
Although mortgage rates are the highest they’ve been since the noughties, the housing market is beginning to sense far greater optimism.
Potential buyers, and sellers, have sat tight while interest rates remained high. With inflation at 2% and expectations of cheaper mortgages, this pent-up demand should result in lot more activity.
We may have to wait until 2025, however, before we see the results, due to the trickle down of rates and the shift to greater levels of consumer confidence.
A silver tsunami coming?
So how will this play out for the retirement sector? It’s well-known that the proportion of households where the oldest person is 65 or over is growing faster than any other age group. By 2037, there are projected to be 1.42 million more of these households in England alone – an increase of 161%.
A recent YouGov survey showed that 19% of UK over-50s believe it is ‘likely’ that they will spend their autumn years in a purpose-built retirement community. However, new analysis from Knight Frank showed that private retirement housing accounts for just 0.6% of dwellings in the UK, meaning that a vast demand remains unfulfilled.
If retirees can be convinced, in large numbers to, swap their bigger than needed home for something more suited to older living, it would go some way to solving the wider housing crises we currently face. Many have been calling on the government for help; either through more lenient planning rules for retirement developments or through stamp duty cuts. Maybe the new government will be more forthcoming although there was nothing in Labour’s manifesto addressing the issue – nor for that matter, any party.
Changing perceptions
Despite there being a massive target market of 11 million+ retirees, many of whom own their own homes with a large amount of equity, developers have to work extremely hard to sell the circa 10,000 units that come on to the market each year.
The common misconception is that retirement living is the same as a care home. Clearly, this is not the case and a growing number of later-living developments prove that these establishments are more akin to luxury 5-star hotels.
Nevertheless, retirement developers not only have to persuade buyers that their development is the right one, but they also have work equally hard in marketing the concept of retirement living.
Previous research has stated that lack of choice as also being a barrier to entry. It’s good to see then that developers have been addressing this by providing far more occupancy options, including part and outright ownership as well as rental.
Helping sellers sell
There are many reasons why we, and companies like us, are asked by developers to step in and help, and it’s not just because they need us to buy their customer’s existing property. Moreover, what they need from us is flexibility and agility.
Over the last four years, though, we’ve seen developers introduce PX to customers far earlier in the sales process, realising that that their customer may not be able to sell on the open market, even at a much-reduced price, or within the developer’s timescales.
As well as the guaranteed sale, we also give customers a 28-day licence to remain in their existing property after completion which takes the urgency out of the move.
Our Chain Break service has also been much used, and in line with the rise of fall-throughs. Here, we can step in anywhere in the chain to enable the developer to regain control of the sales process by either buying their customer’s home or even their customer’s buyer’s home.
Other times, the developer’s buyer just doesn’t want the hassle of managing their home sale themselves and so our Assisted Sale service does that for them, starting by getting the right valuation, listing the property, organising viewings and managing the whole process for a stress-free exchange.