Last Time Buyers
We often hear about the plight of first-time buyers but the Daily Mail highlighted the plight of last time buyers this week suggesting that the value of retirement homes have not all shared the gains enjoyed by those homes in the wider housing market
The paper quotes Sebastian O’Kelly, founder of the campaign group Better Retirement Housing
‘Retirement housing has been a snake pit of rip-off practices and absolutely abysmal resale values. Buying a retirement flat can be the single worst residential property investment one can make in the UK’
We appreciate that the financial performance of an asset is important, but housing is first a source of shelter and second a store of wealth. It is also telling that typically those who complain about the value of retirement homes are those inheriting the home rather than those living in the property.
Does retirement housing get bad press?
In our view, the phrase ‘retirement home’ or ‘retirement homes’ has negative connotations. When we talk about retirement housing we are talking about housing that is more appropriate to a person or households age and stage.
Our housing needs change as we age. Active empty nesters may wish to downsize to make the most of their leisure years, whereas other households may seek housing more suited to their evolving needs, which are, in the main driven by reduced mobility, for instance being able to walk upstairs with ease or maintain a home.
Our life expectancy is increasing, but we typically spend the last 10 years of our lives with impediments to our mobility – stairs become the enemy, DIY becomes even less pleasurable.
The benefits of age-appropriate housing
Improved quality of life: 96% of residents surveyed in McCarthy & Stone retirement properties would recommend McCarthy & Stone
Improved well-being It is well recognised that isolation is a major problem for many elderly people. Retirement or age-appropriate living can reduce this sense of isolation; it is easier to make friends when living in the same building and where you live among peers. Retirement reports that 83% of their customers experienced a sense of community in their new property.
Improved independence Age-appropriate housing is designed with impaired mobility in mind: lifts not stairs, no plug sockets at floor level, raised washing machines, walk-in showers etc, leading to a greater level of independence
The challenges of retirement housing
Whilst we believe in the benefits of retirement housing in combatting isolation and improving independence those benefits come at a cost
Retirement housing is a restricted use asset, typically the resident has to be over 55 years or over 65 years old to live in the property, this narrows down the number of potential buyers of the property, and restricting demand will impact the sale price.
Inertia. It is a big wrench to move out of the family home to a smaller property, even if that property is difficult to manage, maintain and move around. The memories of seeing your family grow up and of time spent with loved ones are hard to leave behind. Retirement properties are also typically smaller than your current home and throwing away possessions which have.
Family members may also have as much interest in their inheritance as in the home itself and press articles like the one in the Daily Mail this week will no doubt cloud their thoughts about the benefits of their parents or parent moving into a retirement property.
Retirement housing: the better alternative
We believe that there is a third way when it comes to retirement living. Rather than staying put in an age-inappropriate home or moving to a bespoke age-appropriate home, why not make your existing home age-appropriate?
Many adjustments can be made to an existing home to make it more age-appropriate whilst turning the home into a restricted use asset. Kitchens and bathrooms can be reconfigured, windows can be automated, stairlifts can be fitted.
This means that memories and possessions do not need to be left behind and financial concerns about the house price performance will not come into play.
Alterations to an existing home are not permanent, rooms can be reconfigured and stairlifts can be removed, although once you have used one, why would you ever want to climb stairs again..?
Fractional homeownership to fund the alterations
The big question will of course be how these alterations will be paid for. Older households are typically asset rich but cash poor, but that does not need to prevent alterations from being made.
Fractional ownership, in this case selling a fraction of your home, would provide the funds needed to make the age-appropriate alterations without the need to move into a restricted use asset. By selling a part of your home to pay for the work, there would be no debt involved and no loan to pay off. If for instance, you sold 5% of your home to pay for alterations and to allow you to tick a few more things off your bucket list, then when you eventually sell your home 5% of the sale proceeds would go to the fractional owners and 95% remains in the family.
This could help address the issues of mobility and inertia whilst also protecting the wealth of the family. You can read our Case for Fractional Homeownership here.