Retirement revolution

“There is still no cure for the common birthday,” former US astronaut and senator John Glenn is said to have once uttered. Glenn was the first American to orbit the earth in 1962 and decades later became the oldest person to fly in space, boarding the space shuttle Discovery in 1998 at 77 years of age.

Peter Otway, 82, and his wife, Doreen, 79, could be called pioneers of domestic space; and while they have not discovered a cure for age, they have invested in an increasingly popular prophylactic. The Otways were among the first people to take up residence at the newly built Grove Place retirement village in Romsey, Hampshire, a facility of roughly 100 units near the south coast of England.

“I think it was the best thing we did. We should have done this years ago,” says Otway. By swapping their four-bedroom family house for a flat in a planned senior community, they joined a fledgling housing movement real estate experts expect will soar over the next decade in the UK and elsewhere, largely thanks to demographics and a looming pension crisis.

“If you can point to one sector likely to grow over the next two decades pretty much everywhere in the west, it would be housing for the elderly,” says Liam Bailey, head of residential research for estate agency Knight Frank in London.

While planned retirement communities have flourished for decades in many developed markets, such as the US, Scandinavia, Australia and New Zealand, such purpose-built housing is taking root only now in Britain. Bailey says the lag is largely due to a shortage of free land and a lack of local zoning recognition, which cast potential projects in regulatory limbo. He is, however, confident market pressure is building to blast these impediments aside.

Older households form the country’s fastest growing demographic group and will represent half of all household growth between now and 2026, according to a recent Knight Frank report. Of UK residents over 65, 89 per cent live in mainstream housing, usually in under-occupied family homes. The Council of Mortgage Lenders estimates older households possess about £1,000bn of unmortgaged equity, or roughly half of all housing wealth in the UK.

Unsustainable, escalating fiscal costs of pensions, healthcare and other needs of an ageing population mean more real costs of retirement will soon fall on individuals, argues Knight Frank. The elderly who find themselves asset rich but income poor will be under more pressure than ever to trade down or out of the housing market to finance their later years.

While selling off the family home sounds (and often is) traumatic, housing experts foresee a series of happy collateral effects. Concentrating seniors together in retirement communities makes administration of geriatric healthcare more efficient and less costly; family homes currently in short supply would be more available; the pension crisis would be eased through the use of private wealth; and, perhaps most importantly, seniors who opt for such solutions often achieve a higher quality of life and extend their independence for longer than those who do not.

Senior-housing scheme operators and consultants describe UK demand and supply as building up like the pressure on a champagne cork. “The elderly are only failing to downsize due to a lack of good quality retirement village options,” claims Nick Sanderson, chair of the Association of Retirement Village Operators and chief executive of developer Audley.

Andrew Surgenor, head of the healthcare division for UK-based estate agency Savills, says many developers are eager to enter the sector but economic conditions are making it tough to find project financing. In addition, elderly people who would like to move have found it difficult to sell their homes.

Otway is happy he no longer needs to worry about the garden, house maintenance or hiking a mile to retrieve a daily newspaper. Their apartment includes easy-grip taps for arthritic hands, wide doors for wheelchairs, waist-high electrical sockets, emergency alarms and a bath hoist for his wife, who suffered a stroke two years ago. Otway says her mobility has greatly improved since the move, as well as her general wellbeing. They can request in-home help or additional medical attention on an as-needed basis.

“It is like this load just lifted from her shoulders,” he says. Like many UK retirement villages, Grove Place offers luxury hotel amenities on a refurbished old country estate and its historic manor house is the centre of communal life. Importantly, there are new friends to see and activities during the day. Otway organised the 900-volume library and now chairs the Grove Place Residents Association. “We used to live on an estate where most people went to work. No one was there during the day.”

Residents buy their homes and pay ongoing fees that vary with the type of services they need or desire. The Otways paid £325,000 for their two-bedroom flat and ­currently pay £1,500 per quarter in service charges. When his home is resold, 10 per cent of the sales price will go to the village operator, LifeCare Residences, which is run by Gavin Aleksich, a seasoned retirement village entrepreneur who moved from New Zealand to the UK in 2005 after identifying it as a particularly promising market.

He foresees Asia undergoing seismic change in care for the elderly, particularly in China, where the one-child policy has undermined the family-based tradition, leaving typical adult couples with four parents and a child to look after. “They don’t have answers yet but there are a range of providers moving in,” Aleksich says. He adds that real estate downturns like the UK’s can actually boost the retirement community sector by steering developers away from traditional residential schemes, where demand is slack, toward housing where sales are need-based and cannot be deferred. Aleksich points out that New Zealand’s senior care communities took off in the late 1980s during a significant property market correction.

The UK’s BMB Property Investments, a developer specialising in elegant homes in the prime central London market, recently entered the retirement village sector with a development with a business model similar to that at Grove Place. Welland Quarter in Market Harborough, Leicestershire, is also operated by LifeCare Residences and BMB is planning to develop two additional villages. Director Julian Mercer feels he is offering an alternative to rent-based luxury continuing care residences that can expose residents and family members to terrific financial strain.

Other continuing care rental operators advise potential clients to consult a professional financial adviser before entering a continuing care residence as well as to consider buying “immediate needs” annuities, which require a large lump sum up front but guarantee a certain level of income for the rest of the life.

A less luxurious retirement housing option, and one that has proliferated for decades in the UK, is the purpose-built retirement housing development, which offers neither care nor hotel services but does offer disabled-accessible facilities with call bells to the house manager and communal lounges and laundries. Such flats can be purchased through specialised developers such as McCarthy & Stone or can be rented out from operators such as Girlings Retirement Options.

Girlings’ assured tenancy agreements guarantee occupants the right to stay for the rest of their lives. Rents cost from £450-£1,000 per month and are subject to an annual increase in line with the retail price inflation index (RPI) but with a ceiling of 6 per cent. The company runs 2,500 units in England, Scotland and Wales and also has a programme to buy and lease back homes. “Demand is increasing on a daily basis,” says Girlings’ founder and head, Peter Girlings. “We are looking to buy new stock all the time.”

One striking difference between UK and US retirement housing schemes is that UK schemes generally appear aimed at people motivated by a health scare, bereavement or an age-related infirmity. As Surgenor puts it, “They are not sold on fear but offering a solution to that fear.” In the US, common sales refrains advertise “a vacation everyday” or “resort living”. Selling points are social contact, rich services and community activities. Mostly, they sound the opposite of retiring.

Helen Felton, aged 82, joined the Warm Beach community in Washington State in 2006, which offers arrangements from independent living to nursing care. Larry Foss, executive director of Warm Beach, says its 350 residents invest 30,000 hours per year in community work. Felton devotes herself to the choir. “This is the most wonderful place in the whole world,” she says.

Perhaps the next generation of British seniors will peek over the pond and demand what they seem to be missing. Retirement villages could give them that chance.