market review

Market Review

The opportunity in the retirement sector over the longer term is undeniable

2019 marked one of the most politically volatile periods for the UK as the torment over the future relationship with the European Union unfolded. The housing market was one of the many sectors that felt the effects of this uncertainty.  

A lack of new properties listed for sale led to a stagnation of house prices with the overall pace of growth slowing. However, green shoots in the UK housing market did begin to emerge in the third quarter of 2019. 2020 has defied predictions in almost every way, and it is too soon to say what impact this will have on the recovery of the housing market. But the one thing that remains true is that there is more demand for housing than there is supply.

Nowhere is the lack of housing supply more keenly felt than in the retirement sector, where there remains a chronic shortage of housing.

Figures from the ONS show the population of people aged 65+ is set to rise by 22% from 11.7m in 2015 to 14.3 in 2025. This generation, according to analysts, is also the wealthiest ever having benefitted from decades of inflation.

£0.8bn

The potential annual NHS savings if 5% of over 65s lived in housing with care

48%

Percentage of over 65s who are interested in downsizing

23,000

Annual fall in retirement homes being developed from 1980’s to 2010’s

Yet the market continues to lag. According to the Elderly Accommodation Counsel (EAC) there are 730,000 retirement housing units in the UK, and more than half of those were built or last renovated over 30 years ago.

Housing With Care is a subset of the asset class with strong growth potential. Only 0.6% of retirees live in housing with care, and that percentage has barely increased in a decade. Yet those figures stand at 5% in more mature retirement property markets like USA and Australia. JLL estimates that there is a need for 725,000 Housing with Care units to be built by 2025 to satisfy need. In its Vision 2030 blueprint, ARCO (the Associated Retirement Community Operators) puts a more conservative figure on the immediate future, but still aims to increase the number of people living in retirement communities from 75,000 to 250,000.

This potential has not escaped the market, and institutional investors continue to invest large sums. Audley Group’s own joint venture announcement with Octopus Real Estate and Schroeder’s is one of several new partnerships announced which should benefit the sector. 

And it isn’t only the business world that is taking notice. 2018 saw Westminster sit up and engage with the sector, and despite continued delays in the publishing of the government’s Green Paper into social care, that interest has continued.

ARCO has welcomed the government’s commitment to increase social care spending and urged them to consider the impact that suitable housing can have on reducing the pressure on services. That pressure has truly told in early 2020, as the global pandemic ravaged care home and hospital services up and down the country.  The reality is that retirement communities have the potential to save the government significantly by reducing the strain on the public social care purse.

To match this potential, local authority support is vital. There is increasing understanding amongst local planning authorities of C2 planning, developments which provide on-site care and support, rather than the traditional C3 residential developments. Audley Group has been influential in spearheading this change in perception and shaping a more modern day understanding and appreciation that ‘care’ is an outdated term and provision should support a holistic and proactive approach to wellbeing support. 

Accelerating this understanding, and the proactive willingness to identify land and sites that would benefit these types of developments, is essential. While the pandemic has necessitated enormous government intervention, funding for local authorities providing social care is nonetheless expected to improve in the next five years.

Figures show that the UK retirement living market sector generated £5 billion in 2019 and employed 21,584. These are significant numbers, but in real terms the growth in the market between 2014 and 2019 was in fact only 0.5%.

The uptick in investment interest and government activity bodes well for the enormous changes we anticipate in our sector. 2019 may have been something of a bumpy ride in market terms, and 2020 even more so, but investors continue to recognise the significant potential in specialist retirement housing with care developments.

As the retirement living business continues to evolve and mature, our unrivalled longevity and experience in the market will be an all-important factor in Audley’s continuing success. It will offer much-need protection against any potential economic shocks that may happen as the country begins the long and arduous road of securing its trading position on the global stage.