As discussed earlier, the current retirement housing market is generally split into two sub-sectors. There is the aspirational downsizer market offering a premium product for people pro-actively looking to move and there is the needs-based market where demand tends to be driven by people requiring greater levels of care, support and security. The biggest challenge and opportunity for the sector is therefore in filling the gap between these two sectors by delivering an aspirational product that encourages people to downsize, but at a price that works for someone living in an average priced home.

Unfortunately, the economics of downsizing from an average priced home are not attractive enough by the time stamp duty on the new property, moving costs and fees are accounted for in all but the highest value markets. This is even before any allowance for the emotional strain of moving and the desire to release some additional cash from the process. Therefore, we need to look towards other tenures and financial models to unlock the market’s potential.

^{Source: HM Land Registry}

A stamp duty exemption, for example, would be a very welcome move in making downsizing more attractive. Unfortunately, it appears unlikely to happen given the difficulties in ensuring the benefits are realised by the homebuyer and not by the developer through higher prices. It also causes some political difficulties in supporting a group of people widely seen as beneficiaries of the housing boom rather than those priced out, despite its potential to free up family homes for younger buyers.

Instead of simple solutions, it appears likely that we will be reliant on more complex arrangements and financial instruments. Equity release products such as home reversion schemes and lifetime mortgages, shared ownership and long-term rentals are all likely to become more widely available in the sector. Much will depend on the result of the Law Commission’s review into exit fees with a paper due this month. Many prospective buyers are asset rich but cash poor. In the event that it allows them, we will probably see more substantial investment into the sector and a big increase in housing/care products based on sharing the capital value uplift to offset ongoing service charges and care needs, as is common in New Zealand and Australia.

Creating financial incentives and the means for more people to move into older peoples’ housing is important, but more essential is the need to create homes that people actually want to move into. Developers taking a general market approach to the sector may struggle. It will be essential to understand both the local market dynamics but also the housing needs and demands of the many sub-sectors of demand for older peoples’ housing.

The challenges presented by our ageing population are many, but the opportunities they present for the elderly housing sector are just as widespread. There are already many active participants in this sector but to fully realise the potential there needs to be support from all levels of Government and continued innovation by developers, operators and lenders that results in products that are both attractive and affordable to older people.