Retirement home rentals are on rise claims report
MELBOURNE: Retirement home rentals are now a growing segment of the housing market says a new report.
Things weren’t looking too good last year for McCarthy & Stone, Britain’s largest builder of retirement homes. In June it issued a profit warning, saying that it was struggling after the Brexit referendum as baby boomers and their parents put off plans to sell their homes until the market picked up. In July Times Money recommended in its Share of the Week column that readers sell their holdings in the company.
In September the housebuilder, which controls 70 per cent of the retirement-home market, revealed a five-year plan. Billed as a “shift in business mindset” and introduced by its chief executive, John Tonkiss, a key part of is to offer properties for rent as well as for sale (with an option for shared ownership).
It isn’t only Brexit that has bedevilled the market. Retirees were already put off by the cost involved in owning a retirement home, which can include high service charges and large exit fees — particularly in retirement villages with lots of facilities — and which leaves the extended family struggling to sell a home whose capital appreciation has not grown in line with the wider local market.
These factors have led to people questioning the wisdom of buying a home, and paying stamp-duty costs, towards the end of their lives. Renting seems the more financially sensible approach. So McCarthy & Stone’s news that, from this month, you can own, rent, or buy through shared-ownership, homes in 11 of its projects — including Maidenhead and Crowthorne in Berkshire, and Scarborough in North Yorkshire — is a significant step.
Rents start at £900 a month for a one-bedroom apartment and £1,470 for a two-bedroom flat. Costs for its premium Retirement Living Plus development, which includes additional care, support and subsidised food, start at £1,700 a month for a one-bedroom flat and £2,320 for a two-bedroom apartment. The prices will vary depending on location.
The tenancy agreement terms start at 12 months, with a two-month notice period, and the rent is decided at the outset, with an annual increase linked to the retail price index, at a minimum of 0.5 per cent. The service charge is included in the rent.
Auriens, the most expensive retirement-property scheme in the country, off Kings Road in Chelsea, southwest London, switched to rental in January. Initially the scheme of 55 apartments was launched on the sales market, but, after presumably no sales were completed, the decision was made to make it 100 per cent rental.
“After consulting our potential residents, the overwhelming majority preferred the flexibility of renting compared with purchasing a retirement home,” the company stated.
The rental costs start at £130,000 a year for a one-bedroom apartment, or about £11,000 a month, and from £175,000 for two bedrooms (£14,500 a month). This includes use of a pool, gym, 24-hour concierge, breakfast in the restaurant, use of the cinema room, maintenance of the gardens and two and a half hours of care a week provided by Draycott Nursing, a company that is used by the royal family.
The retirement scheme is designed to look nothing like one. The interiors were overseen by Richmond International, which designed parts of the Langham hotel in London, and the restaurant and bar were shaped by Sebastian Fogg, formerly of the Ivy.
Behind the project is Johnny Sandelson, the founder of Guestinvest, which introduced the concept of buy-to-let hotel rooms before going into administration in 2008. He has since invested in large parts of the Queensway area of west London.
“At Auriens we want to change perceptions of later life [living], offering our customers the service of a luxury hotel, the care of a Swiss medical clinic and the style of a private members’ club,” Sandleson says.
“Renting in retirement is not a new thing,” says Lawrence Bowles, a research analyst at Savills. “There has been sheltered housing for rent as part of the social sector for a long time, and we already have a substantial number of over-65s living in regular rented accommodation.
“This move by McCarthy & Stone and Auriens is recognition that, if you’re moving into these schemes, your expected length of residence isn’t long. Rather than have the faff of selling, buying again, and leaving your relatives to sell again in five or six years’ time, renting allows you to unlock housing equity sooner for healthcare, to give to relatives or for travelling the world, without having to tie it up in property. There’s a capital-preservation element too.”
Bowles says that the stamp-duty argument is magnified at the top end, where the charge could be equivalent to as much as one or two years’ rent. “At that point the arithmetic looks more attractive to rent,” he says.
Tonkiss says that McCarthy & Stone’s research shows that 50 per cent of customers are happy to rent in retirement and that there are three type of renters: those who want to free up equity to spend; people who want “rent to rent”, letting their main property while renting a retirement home and using the difference as an income; and those who have rented for a long time who wish to continue doing so.
“The challenging conditions in the secondary housing market and the high level of stamp duty can make purchasing difficult, so renting provides another option,” he says.
According to the Centre for Ageing Better, nearly three million people over 75 have never used the internet. In McCarthy & Stone’s rental scheme, the company is also trialling new technology and training for residents. This includes staff giving weekly talks on online piracy, phishing, setting up email addresses and downloading useful apps.
The housebuilder is also working with with MySense, a healthcare solutions company, to trial fall-prevention technology, which is designed to predict when an older person might fall and detect when they have done so, sending an alert to family members or carers.
Will Purvis, the head of services for McCarthy & Stone, says: “Being able to take intervening action early can not only reduce the risk of fall or serious injury, but can provide care-givers with useful insights to help them monitor [a resident’s] condition over the long term.”
An online GP service, provided through Babylon Health, will also be tested. Residents can book an appointment (using a FaceTime-like video app) and speak to a doctor within 15 minutes.
