New research into ‘traditional’ leasehold retirement housing shows that recently built properties, on average, increase in value on resale.
Drawing on available Land Registry data, matched to its own database of retirement developments, the Elderly Accommodation Counsel (EAC) has begun to shed light on a topic that has raised questions from prospective purchasers for many years.
“This report shows that recently built traditional ‘sheltered’ properties have, on average, improved their values upon resale,” said Adam Hillier, the report’s author and EAC deputy chief executive.
“EAC looks forward to working with the industry to drive forward its recommendations for the further benefit of consumers.”
The charity’s research finds that, on average, new retirement developments with onsite management, but not care services, built since 2009, saw an improvement in property values on subsequent resales made between five and nine years later.
However, an average retirement property built between 2003 and 2008 and sold during, or shortly after, the 2007-08 recession, would have experienced a fall in value.
As part of EAC’s research, they considered a number of factors that can lead to improved resale values and found that proximity to local shops and services, as well as having an engaged scheme manager, are essential components for any retirement development.
The full report explores a range of measures that developers and managers have taken in recent years to improve resale values, and makes a number of recommendations that EAC believes could further build confidence in the traditional leasehold retirement housing market.
The retirement housing market provides a range of housing options that can prevent early reliance on health and social care services.
Additionally, the communities established within these developments can help reduce social isolation.
EAC has been a long-term supporter of retirement housing, due to the positive impact this form of housing is recognised as having on the lives of older people.
However, recent concerns about the reputability of managing agents, ‘event’ fees, service charges, and, more recently, ground rents, have caused a degree of concern that threatens to stifle growth in the leasehold retirement housing market.
But there is one main issue that prospective purchasers raise with EAC on a regular basis, and that is whether their brand-new retirement property will lose value when it is eventually resold.
This is why EAC elected to conduct preliminary research in 2017 into the extent of which new-build ‘traditional’ retirement housing can lose its value.
The resulting research revealed that, while many people who purchased a retirement property in 2003-2009 would have seen a fall in the value of their home, properties built in recent years, since 2010, have on average increased in value.
The result of this initial work saw an overwhelming level of interest from members of the public and professionals alike, with the key question addressing the extent values in retirement housing have fallen, what the causes of that may be, and what steps have led to an improvement in recent years.
EAC concluded that a more thorough report, that explored the essential factors that can lead to falls in the value of previously new retirement properties, as well as those that can have a positive impact, would be of benefit to older people, their families, and professionals operating in the sector.
The report is predominantly focussed on the capital value of a retirement property, as the question of depreciation is something that has been raised by many older people and their families to the EAC FirstStop Advice line over previous years.
The experience of that service is that the majority of people living within these communities have not purchased their home in order to benefit from any increase in value – they have moved out of an aspiration or need to live somewhere that is suited to their needs.
As recognised by the report, there are many ‘pull’ factors that can encourage a person to consider a move into a retirement housing development, whether that is buying a property or renting from a social landlord.
In EAC’s survey, respondents were asked what their main reason for considering a move into this form of accommodation was.
The responses were:
- 52% wanted to move into a property more manageable and suited to their needs
- 22% felt isolated and wanted to become part of a community
- 15% cited ‘other’ reasons, primarily one being peace of mind for themselves and their family
- 11% were downsizing to free up capital and saw retirement housing as an affordable option
Leasehold housing developments for older people fall broadly into three categories: age restricted only, age restricted with an on-site support service to residents, and age restricted providing both support and personal care to residents.
In its research, EAC decided not to consider housing-with-care/retirement villages or straightforward age-exclusive housing, acknowledging additional factors present within these models that would require additional time and resources to fully explore.
The report instead focussed on developments with on-site support only, the most common form of retirement housing making up over 75% of all English age-restricted leasehold housing.
Following an initial exploratory analysis of available data, EAC concluded that its research should focus on the initial sale of new retirement properties and their first resale.
This was decided having established early on that it was between these two points that properties were most at risk of experiencing a fall in value.