The sale of retirement properties in the UK has brought to light significant financial challenges for families. A case in point is a flat originally purchased for £252,000, which took six years to sell for only £122,000. This illustrates the broader issue of wealth erosion in retirement housing, as highlighted by the Leasehold Knowledge Partnership. Compounding the financial burden, service charges and other fees accumulated over £50,000 during the wait to sell.
The flat was part of a development owned by Pegasus, where a third of the units were either empty or sublet. This situation is not isolated, as only 0.6% of over-65s in the UK reside in retirement complexes, a stark contrast to the tenfold higher numbers in the US and Australia. The pandemic exacerbated these challenges by initially hindering property viewings.
Properties in such developments are typically sold on a lease basis, often for 125 years. However, as the lease length diminishes, so does the property's value. Despite these difficulties, Fleur-de-Lis reported an average resale value of 91% of the original purchase price over the past 18 months, attributing this to current market conditions.
"Over the last 18 months, our resales team have achieved an average resale value of 91% of the original purchase price, which, given wider housing market conditions, is expected," – Fleur-de-Lis
This contrasts sharply with the aforementioned case where the resale price was less than half. During the waiting period, additional costs mounted significantly. Service charges exceeded £4,000 annually, council tax added another £2,000 each year, and interest on unpaid care home fees also amounted to £2,000 per year.
The Leasehold Knowledge Partnership's Sebastian O’Kelly emphasized the impact on families:
"Retirement housing has resulted in massive wealth erosion for thousands of families," – Sebastian O’Kelly from the Leasehold Knowledge Partnership
These financial strains underscore a systemic issue within retirement housing. The reality of diminishing property values over time and extensive fees illustrate why so few older adults in the UK choose this living arrangement.