2024-08-21-莱坊-UK_Seniors_Housing_Market_Update_Q2_2024_5页_1mb

UK Seniors Housing Market Update – Q2 2024

Core Content

This report provides an overview of the UK seniors housing market, highlighting trends in supply, development, investment, and future outlook. It outlines the current state of the market and the challenges and opportunities facing developers and investors.

Main Points

1. Supply Growth and Shortfall

• New Supply Increase: In 2023, over 9,160 new seniors housing units were built, marking a 20% increase from the previous year and the highest since 2016.
• Supply Shortfall: Despite this growth, new completions account for only 3% of total new homes built annually. The over-65 population is projected to grow by four million by 2043, at three times the national average.
• Annual Target: The 2022 Mayhew Review suggested that 50,000 new units should be delivered annually to meet housing demand.
• IRC Dominance: Integrated Retirement Communities (IRC) accounted for 58% of new seniors housing units in 2023, reflecting a trend towards larger, more integrated developments.

2. Scheme Trends

• More Schemes: 183 new schemes were delivered in 2023, a 17% increase from the previous year.
• Larger Schemes: The average size of new schemes is growing, particularly within IRCs, which averaged 117 units per scheme in 2023, up 30% from five years prior.
• Apartment Preference: 94% of new schemes were apartments, with one- and two-bedroom homes being the most common (82% and 93% respectively), while only 12% offered three-bedroom homes.

3. Market Structure

• Two-Tier Market: 89% of existing seniors housing supply was built before 2012, with 70% built before 1990. This has created a disparity in the quality and age of stock.
• Government Target: The new government aims to build 1.5 million homes over the next five years, with seniors housing playing a key role in addressing demographic and social care needs.

4. Development Pipeline

• Planned Growth: Around 200 new planning applications were submitted in 2023, with 270 schemes receiving planning permission for 14,474 additional homes.
• Pipeline Size: There are 115 schemes with 100+ units in the planning pipeline, compared to 155 currently operational.
• Regional Focus: The South East leads with the largest pipeline, at approximately 6,742 units, followed by the East of England, North West, and South West.

5. Development Challenges

• Cost Pressures: Rising build and site costs, skills shortages, higher financing costs, and complex planning policies have slowed new starts.
• Cost Moderation: Build cost inflation has eased to 3.1% in 2023 from 15.5% in 2022. Tender pricing is expected to drop further, supporting future development.

6. Tenure Diversification

• Rental and Shared Ownership Growth: There is an increasing focus on rental and shared ownership models, driven by demand and the need to offer broader choices.
• Private Rental Units: Private rental units are expected to nearly double from 4,100 to nearly 10,000 by 2027.
• IRC Rental Elements: A growing number of IRCs now include private rental options, reflecting a shift in business models.

7. Investment Activity

• Investment Volume: In Q1 2024, just over £340 million was invested in the sector, with all activity focused on land acquisitions.
• Annual Investment: Over the past 12 months, total capital invested and committed to the sector reached £1.8 billion.
• Debt Cost Expectations: Financial markets expect a significant drop in the cost of debt, with the Bank of England possibly cutting the base rate to 3% by the end of 2025.

8. Challenges to Investment

• Operator and Data Shortages: Institutional investors cited a lack of high-quality operators (43%) and data (40%) as the top challenges.
• Event Fees Clarity: Recent legal clarity around event fees has increased confidence among consumers, operators, and investors.

9. Land Values

• Land Market Trends: Average land values in England remained flat in Q2 2024, down 2% year-on-year.
• Residential Land Decline: Overall residential land values have fallen by nearly 20% over the past two years.
• Land Scarcity: Despite financial and build cost challenges, land scarcity is driving competition in several markets.

Key Information

• IRC Growth: IRCs have become the dominant model in seniors housing, with a focus on scale and operational efficiency.
• Future Outlook: The market is expected to grow, with more rental units and larger developments in the pipeline.
• Investor Confidence: Improved debt cost forecasts and legal clarity are expected to boost investment activity.
• Demographic Trends: The aging population and increasing demand for age-appropriate housing will continue to drive market growth.

Conclusion

The UK seniors housing market is experiencing growth, with a focus on larger, integrated developments and a shift towards rental and shared ownership models. While supply is increasing, it remains insufficient to meet future demand, and the market is still in a growth phase. Investment activity is subdued due to high debt costs and data challenges, but expectations of cost reductions and policy clarity may lead to increased activity in the coming years.