From Property Week | By Guy Montague-Jones | Sat 18 November 2017
In the past few months, AXA Investment Managers and L&G Capital have both entered the market with plans to establish significant platforms. Fuelled by an ageing population and increased investment, retirement living is widely expected to be one of the fastest-growing parts of the property market in years to come.
The Retirement Living conference, which took place in a packed-out County Hall in central London, explored the various business models being pursued and the latest ideas in design and technology, as well as some of the challenges facing the sector such as navigating the planning system.
Here Property Week takes a look at five of the key takeaways from the conference:
1) Rental potential
After decades owning their own homes, could affluent older people be willing to rent? It is widely believed that Brits are too wedded to home ownership for the rental market to really take off, but this may just be received wisdom. John Roddy of Charterpoint Senior Living said he knew of one mid-market operator offering three tenure options, of which rental is by far the most popular, with 70% choosing that option compared with 10% choosing shared ownership and 20% opting to buy.
2) Interest from institutions
Institutional investors are waking up to the sector’s potential. AXA IM’s purchase of Retirement Villages Group last month was the first example of pension fund cash being put to work. Philip Schmid, director of healthcare investment at JLL, which advised on the Retirement Villages sale, said that having seen AXA take the plunge, other institutional investors that didn’t want to do the deal were now actively looking. If the rental model took off, it would be a natural fit for pension fund capital, he suggested.
Honor Barratt, chief executive of Birchgrove – a new company pioneering a rental-only offer – attested to this when she revealed that its backer, Bridges Fund Management, would be looking to sell to an institutional investor once its platform had been built out.
3) Lessons from abroad
UK operators were encouraged to learn from mistakes made in the US and Australia, where retirement living is much more developed than it is here.
Dr Margaret Ann Wylde, founder of US-based consultancy ProMatura Group, said that growth had stalled in the US because too many schemes were aimed at the same high-end market, had too many amenities and failed to make their residents feel at home.
“Not everyone wants to live in a cruise ship on land,” she remarked.
Eugene Marchese, chairman of Australia-based consultancy Marchese Partners, warned the audience to remember that retirement living was about people, not just profit. He cited the example of one of Australia’s largest operators, Aveo Retirement Villages, whose shares plunged in the summer after it was accused of charging exorbitant fees and misleading buyers with complex contracts.
4) Frustration with government
The lack of policy support from government was a common complaint. Several speakers, including McCarthy & Stone chief executive Clive Fenton, urged the government to embrace the findings of a new report from think tank Demos, which called for a stamp duty exemption for older people moving into retirement housing and an exemption from affordable housing contributions and planning charges on retirement housing developments. The report said that current policies failed to recognise the higher costs involved in the construction of retirement housing and ignored the wider market benefits of helping older people to downsize.
5) Investing in tech
Technology is seen as increasingly important for operators if they want to attract residents and stand out from the crowd. As well as putting the latest technology, such as sensors that detect falls, into its schemes, Auriens partner David Meagher said that the company was also investing to help fund new innovations. Through Auriens Ventures it has taken a minority stake in Cera, a tech firm that aims to make it easier for families to organise care for elderly relatives, and has held a hackathon to come up with new technologies to improve the lives of older people.