Despite the retirement industry’s growth in recent years, retirement flats are not selling well.
Why is this? Can it be expected to change?
Read on for an answer to these questions and more.
What is a retirement flat?
A retirement flat is typically a leasehold property in an age-exclusive development.
Buying a flat in a retirement village is a prevalent example in the UK. This is particularly attractive to people over 55.
In addition to the purchase price, buyers will typically have to pay ground rent to live there.
The cost of this can range from £50 to £300 per month, or sometimes even higher.
There are several benefits and drawbacks to purchasing this type of property. We’ve outlined these below.
Integrated Retirement Communities (IRCs)
Retirement flats are increasingly referred to as ‘units’ in integrated retirement communities (IRCS).
IRCs generally feature security and assistance facilities managed by specialist companies.
Currently, only 0.6% of the UK’s over-65 population currently live in IRCs. By contrast the average in the USA, Australia and New Zealand is 5 – 6 %.
IRCs are currently seen as relatively expensive option in the UK. However, with the growing retirement industry, perceptions could change.
Retirement flats and leaseholds
Most retirement flats sell on a leasehold basis. This means that residents have a tenancy granted for a long time.
This is typically either 99 years or 125 years. More recently built flats have often have a lease up to 999 years.
Leaseholds should increase the value of flats in the long run.
Pros of buying a retirement flat
Companionship
Loneliness is pervasive for people at a retirement age. This is especially for those who are widowed.
Living in a ‘retirement village’ is an attractive way of overcoming this. Here, can make new friends and enjoy a far more sociable lifestyle.
Independence
Retirement flats also give residents a sense of independence. They often wouldn’t get this if they lived in a care home.
Safety and security
Finally, retirement flats often provide higher safety and security than regular flats.
They are often part of a more extensive complex with security and safety measures.
This is important to older residents, who are often vulnerable to crime.
Cons of buying a retirement flat
Service charges
In most cases, UK retirement flats are more expensive than flats on the open market.
This is due to the service charges residents must pay. These are monthly fees for the complex’s maintenance and facilities.
It is essential to determining how much these costs will. Discussing this with landlords before purchasing a retirement flat is essential.
Difficult to sell
Retirement flats are more challenging to sell than regular leasehold flats.
Selling a retirement flat quickly is extremely difficult. The time it takes to sell them is often much longer than the average for UK property sale timeframe.
The target market for them is much smaller (aged 55 and over) than a regular property on the open market.
Moreover, you must continue paying service charges while you wait to sell.
Exit fees
A third drawback of a retirement flat is the added cost of ‘exit fees’.
These are also known as deferred management fees or event fees. They are charged once your home is sold.
These fees cover the costs of maintaining retirement villages and future repairs.
Your lease will detail these fees. Before buying or selling a retirement flat, you should be clear on the terms.
Reasons why retirement flats don’t sell easily
1. Smaller market
The main reason retirement flats are not selling is that the target market is small.
When a landlord can only sell to someone aged 55 or over, then this cancels out way over half of potential buyers.
2. Not popular with the target market
Furthermore, figures suggest that only 2% of UK over-65s live in retirement properties (IRCs and larger, shared retirement homes).
So, the number of people searching for these properties is low in an already reduced small market.
Retirement in the UK
The official retirement age in the UK is currently 66 for men and women.
This is the age individuals can access state retirement benefits. It is due to increase in May 2026.
The average retirement age, by contrast, is younger: 64 for women and 65 for men.
Projected retirement trends in the UK
Like most developed nations, the UK is facing an aging population. The number of retirees is increasing while the workforce is shrinking.
This will likely have very serious implications for the economy and housing market.
Example: Japan’s housing market
Japan, for example, has a rapidly aging and declining population.
This has led to an increase in abandoned houses and even towns. The number of empty houses currently stands at over 4 million.
However, the Japanese retirement sector is experiencing growth. But how sustainable this is uncertain.
Wider retirement trends
The growing number of retirees in the UK is driving expansion in the retirement industry. The UK pensions market alone is estimated to be worth £2 trillion.
With this growth comes competition and complexity. The concept of simply retiring on a state and/or private pension is gradually declining.
There is also increased uncertainty about the stability and even certainty of pensions. This leads many people to rely of their home’s equity for financial safety net.
This in turn prevents some from considering retirement flats. They fear associated costs and the possibility that their children won’t be able to sell them later on.
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