Ahead of the Care and Retirement Living Conference this month we caught up with property expert and long-time friend of LD Events, Anthony Oldfield. Anthony gave his thoughts on where the markets at and where it’s going at this interesting time….
Q: What is happening in the current Retirement Living property market?
A: We've seen quite an uptick in the number of new schemes being delivered as the market has recovered from the 2022 mini-budget, which had significantly curtailed development and investment. There was a real pause, but since then, things have recovered well. A lot more units are being delivered, which is great. However, the Mayhew review, a significant government report from last year, recommended an annual delivery of 50,000 new units to meet housing demand. Currently, we're only delivering 10,000 per annum, falling well short of that target. This means the demand-supply imbalance is going to be further exacerbated due to population growth and change. The market is heavily development-led, focusing on new opportunities, sites, and units being delivered. There is a strong planning pipeline, and the new government has emphasised house building as a key pillar of their agenda. While there is quite a bit of activity on the development side, more is needed to meet the targets.
Q: What are the investors doing? Are we seeing interest from new investors?
A: There is real interest from new investors, and we are working with them regularly. They understand the demographic story and recognise the sector's strong ESG credentials. Retirement living is considered the most untapped of the living sectors, which include student housing, build-to-rent, and retirement living. Investors have seen the growth and success of student housing, BTR and single-family housing from a rental perspective. There is a general consensus that retirement living has significant latent potential and is poised to be the next market to take off. Many investors are aware of this potential, but often lack opportunities to invest. We are working to unlock and find these opportunities.
Q: What is the likely impact of the new government on the sector?
A: The new government will definitely impact the sector. There is a lot of legislation that was in progress under the previous government. With the election called earlier than anticipated, it remains to be seen how much of this legislation the new government will pick up and take through the legislative process. For instance, the Freehold and Leasehold Reform Act 2024, which came through on the last day of Parliament, is considered very important for the sector. It defines event fees in legislation for the first time, which is significant for the sector. However, it did not include a cap on ground rents, and the sale of leasehold houses has been banned with an exemption for retirement housing. There is still further work needed, and secondary legislation will be required to implement these changes. The new government's focus on house building will benefit the Retirement Living market, presenting more opportunities for development, especially around the grey belt, which is suitable for larger integrated retirement communities.
Q: Where are the big growth opportunities in retirement living in the next few years?
A: The biggest opportunity lies in the retirement-for-rent market. Historically, much of the stock delivered has been on a for-sale model. However, in the last ten years, there has been a 200% increase in retirement living schemes offering market rent tenure and nearly a 400% increase in market rental units. This trend is expected to accelerate further in the coming years. Many operator clients report high demand from older people wanting to rent. Current operators are not necessarily set up for this, but changes are coming from the bottom up. The rental model offers flexibility, allowing older people to move quickly if needed and providing a greater level of support without moving into a care home. This trend is expected to grow, with more companies likely to offer 100% rental schemes designed specifically for this market.
Q: Is retirement for rent attracting interest from BTR investors? What is the potential?
A: BTR investors might need to think differently initially. There are many pepper-potted retirement rental portfolios performing well, but they differ from standard BTR, where there is 100% control over the whole block. These portfolios have established substantial and latent demand for older people to rent, which is positive. There is a wide price range with high occupancy rates, presenting good opportunities for consolidation and growth in the rental proportion. We expect to see more investment from BTR investors and new investors in this sector in 2025 and beyond.
Join Anthony and a panel of industry leaders, plus hundreds of delegates from the sector, at the 15th Annual Retirement Living and Care conference in London on 20th November. To learn more about the event please visit www.carehomesconference.com