March 29, 2024

Elderly Accommodation Counsel says half new-build retirement flats fall in value on resale

BBC R4 MoneyBox today claims that around half of new build retirement homes sold during a 10-year period were later re-sold at a loss.

This has long been a concern of BetterRetirementHousing.com, formerly the Campaign Against Retirement Leasehold Exploitation.

In all our criticisms of resale prices we have relied solely on unarguable data from the Land Registry.

The overall dismal picture is now confirmed by the Elderly Accommodation Counsel, which claims falls in value could be more than 50%.

Half of new-build retirement homes sell at a loss

Around half of new build retirement homes sold during a 10-year period were later re-sold at a loss, according to exclusive research for the BBC. The research by the Elderly Accommodation Counsel charity found falls in value could be more than 50%.

Based on data of 994 retirement developments built between 1998 and 2012, the EAC found that many properties built after 2002 had underperformed the general property market.

John Galvin, of the Elderly Accommodation Counsel, said the scale of the falls was “startling”.

According to the research, 51% of retirement properties built and sold between 2000 and 2010, and then sold again between 2006 and 2016, suffered a loss in value.

For those properties that declined in value, the average loss was 17%.

For some, the falls are much steeper.

The Elderly Accommodation Counsel found that for new build retirement properties sold between 2005 and 2007, and then resold between 2012 and 2014, more than four fifths fell in value.

The average loss for these properties was 25%.

Sebastian O’Kelly, director of BetterRetirementHousing.com, said:

“Dismal resale prices for retirement properties helps explain why only 2 per cent of over-65s live in designated retirement properties – far less than the US or Australia.

“Something is seriously wrong with the business model that these flats fall so drastically in value. The retirement housing sector will not expand notably until this is addressed.”

For some, the falls are much steeper.

The Elderly Accommodation Counsel found that for new build retirement properties sold between 2005 and 2007, and then resold between 2012 and 2014, more than four fifths fell in value.

The average loss for these properties was 25%.

Mr Galvin said it was unclear why it was happening. “It’s the million dollar question, really.

“I think part of it is the new build premium – especially when it comes to retirement housing,” he said.

Another reason could be under-investment from developers once they have built the properties, he said.

“The traditional model was to hand over these properties to a managing agent to run them,” he said. “Does the developer have that much of an interest in investing in the property?”

The trend has continued in recent years too. For new retirement properties sold between 2008 and 2010, and then resold between 2015 and 2017, nearly two thirds were sold for less than the purchase price.

The average loss here was 19%.

The largest developer of retirement homes, McCarthy and Stone, told the BBC that the numbers did not include incentives given to the original buyers, which effectively lowers the purchase price.

The company also said it had worked hard to increase resale values in recent years, including extending leases, retaining management of developments, and providing sales support.

“The vast majority of our retirement apartments increase in value on resale”, McCarthy and Stone told the BBC in a statement.

This is a familiar statement to BetterRetirementHousing.com and LKP, and we have repeatedly asked McCarthy and Stone for the Land Registry data to support this assertion.

The company added: “It is also important to understand that the value of specialist retirement housing is not purely financial. It improves lives, provides peace of mind, care and support and ultimately helps older people maintain their independence.

“However, we recognise that there are a small number of cases, particularly with our older properties, where resale values of some apartments haven’t performed as we would have wished. This can be down to many reasons, including the performance of some local property markets.”

Comments

  1. Trevor Bradley says

    The usual marketing drivel from the likes of McCarthy and Stone as usual.
    Why don’t you just face the truth and facts MS.
    If you have money to burn and don’t give a dam about losing thousands buy an MS over 55s new flat, simple as that

    • Michael Epstein says

      It was more than money that burned at Gibson Court, but what else can you expect when residents depend for their lives on Firstport not breaching Health & Safety legislation and ensuring fire curtains are not fatally compromised?

  2. Yes Trevor………..

    “The largest developer of retirement homes, McCarthy and Stone, told the BBC that the numbers did not include incentives given to the original buyers, which effectively lowers the purchase price.”

    How about M&$ developed Laurel Court in Folkestone, where my father got an early bird discount of £3k (reducing price to £161k) for being first in, then subsequent purchasers got a late bird discount of 48% (reducing price to £99K). Now these big reduction properties are being sold for £119k (with some profit for the owner) but the early bird owners wanting to sell, now have to reduce prices to match or not get a sale. Its caused a run on the properties prices there.

    Nice people eh?