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The Power Of Customer Choice

Research from Autumna showed 48% of enquiries about retirement properties, were for rental.

Remarkably recent research from Autumna showed 48% of enquiries about retirement properties, were for rental. 

They also said that they are seeing an increase of over 100% year on year enquiries for rental properties.

Research by the Centre for Ageing Better in 2018, found that 414,000 older people are choosing to rent now, up from 254,000 in 2007. They predict that by 2040, a third of people aged 60 and over could be living in privately rented accommodation.

When you match these figures with the Government’s Future of an Ageing Population report that states that 70% of UK population growth between 2014 and 2039 will be in the over 60 age group, an increase from 14.9 to 21.9 million people, that’s a lot of people who are going to be looking for rental accommodation.

There are many factors to consider for this increase in demand for rental properties in retirement. Choice and flexibility are very important in where you live. And rental gives you that flexibility. It gives you a big disposable income to really make the most of your retirement. It also means you’re not stuck in one place. You might want to spend more time with family who are on the other side of the country, or the other side of the world – renting gives you that flexibility. If you always fancied living by the sea, you could try it out for a year and see if you like it or not. You may need to relocate for health reasons and if you’re renting that’s easy, compared with having to sell a property.

Another reason not to be underestimated is, that it makes things simpler for your children. The last thing most retirees want, is the thought of their loved ones struggling to sell their property once they’ve gone and they want to protect the inheritance.

As the Baby Boomer generation enters retirement age, this is presenting an appealing proposition for investors as they are in the wealthiest age group and the majority of them own their own home. By 2025 the youngest baby boomers will enter the market and after that changing demographics and rising costs mean there is a large opportunity for mid-market products.”

Supply Shortfall

According to the English Housing Survey, 80% of over 65s own their own home (either with a mortgage or outright). In the Latest Housing Futures report, a consumer survey published by Strutt and Parker, found 48% of those over 66 stated they would prefer to rent their next home.

This demand for rental retirement properties is just going to get bigger and bigger and as individuals need to plan ahead as they near retirement age, so do retirement living companies and investors that back them. The sector desperately needs to plan ahead, looking to the future, and create retirement homes for this growing market of lifelong renters.

As Samantha Rowland, Head of Health and Senior Living at BNP Paribas Real Estate said, “The lack of supply of homes across the UK is a cause for alarm. We live in an ageing population and in ‘generation rent,’ and, with greater perception and awareness, investment should increase and thus help to support and combat the crisis as rental becomes a more viable option for those who wish to downsize.”

New Models For Rightsizing

ARCO (Associated Retirement Community Operators) have recently announced for the proposed Leasehold Plus model that has been developed with Trowers & Hamlin.

This form of leasehold could be a game changer for the UK sector. If we are going to meet the Mayhew Review in which it said that the UK Government must build 50,000 new homes for older people each year to tackle the UK’s housing and social care crisis, then innovation is needed.

The Leasehold Plus model is great news in that it offers more choice for the over 65’s to rightsize. This alongside the growth in the mix of tenures – options like purchase, rental, part buy part rent, rent to buy and shared ownership, provides different options for customer preferences.

Attracting New Capital

Encouragingly we are now seeing the sector attract a broader investor pool due the widening supply and demand imbalance and the demographic tailwinds.

There are a host of new buyers entering the market as reported by Savills recently. Real Estate Investment Trusts (REITs), institutional investors and Private Equity funds all starting to pursue opportunities in the sector predominantly due to the rise of rental operational models and models that offer a form of care.

IRR drives the sector and quicker sales velocity would untap the mountain of capital.

There are a multitude of factors that go into optimising marketing and sales to increase sales rates and improve IRR. And by making small improvements in every area that you can control; you really can make an enormous difference to IRR.

As David Brailsford so successfully did at British Cycling. He introduced the concept of ‘marginal gains’: The whole principle came from the idea that if you broke down everything you could think of that goes into riding a bike, and then improved it by 1%, you will get a significant increase when you put them all together.

Embracing Customer Choice

The increasing offers of more flexible choices should encourage more customers into our sector.

The UK has huge scope for growth as currently the penetration rate is only about 1% for over 65s who live in IRCs (compared to 6.5% in the USA).  That equates to an extra 325,000 homes and around £125bn in value.

The Times recently reported that the over 65s have a record £2.2 trillion in mortgage-free housing wealth.

Shifting the Negative Customer Perception

By continuously reinforcing and educating customers about the amazing community and lifestyle benefits, hopefully the negative perception issue from many customers will be eroded.

We all need to dial up the positive exposure that showcases the incredible communities, quality and facilities available.

With everyone embracing this and getting the messages out, we will push this sector forward.

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