Retirement living – the next crisis and opportunity – The Property Chronicle
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Retirement living – the next crisis and opportunity What is the future for this major growth market?

Investor's Notebook

Skeleton key hanging on wooden door

A key priority for government is to build new homes, particularly social housing, but the demographics point to another major shortfall over the next 20 years. According to McCarthy & Stone (MCS), the retirement living sector leader, of the UK population of 65.6m, 11.8m are 65 or older, of which 3.4m have equity of £250k-£500k, of which 1.3m are considering downsizing. This compares to just c.157,000 owner-occupied retirement properties built in the UK. In addition, for the C2 planning use, there is in theory no obligation to build ‘affordable’ homes (although this is being challenged in London) which should help development viability.

The investment case therefore for entering the retirement living market should be compelling, and it’s very interesting to see Legal & General enter the market with its recent investment in Inspired Villages and purchase of the Helical retirement villages portfolio, following AXA’s investment in the Retirement Village Group.

So why so few listed retirement living builder/operators, especially as the homebuilder sector has been such an outperformer with stocks trading on material premiums to book? A key factor is that MCS, which listed two years ago, has materially underperformed the sector and currently trades below its IPO price. Several external factors have been at play:

Investor's Notebook

About Robert Fowlds

Robert Fowlds

Robert Fowlds retired from investment banking in 2015 as Head of Real Estate Investment Banking for JP Morgan Cazenove. In 10 years Robert led or co-led around 60 public market transactions including IPOs, equity raises and M&A. Prior to corporate finance, Robert was Co-Head of Real Estate Equity Research at Merrill Lynch, and previously Kleinwort Benson, where his team was #1 ranked in the Extel and Institutional Investor Surveys for 11 years. Robert's early career was as a chartered surveyor.

Articles by Robert Fowlds

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