According to new research from Savills, a number of factors have led to developers and house builders adopting a cautious approach to retirement living in Scotland. However, examples from elsewhere in the world reveal an untapped opportunity, including a two-tier approach that is not solely focused on the top end of the downsizer market.
Savills research points to a number of challenges facing the Scottish sector, including relatively high land prices in Scotland compared to other parts of the UK; lower levels of equity available to downsizers to spend on their next home; and an inconsistent approach to planning across Scottish local authorities.
With a growing older population who have a pressing housing need and equity to invest, not only is there a commercial opportunity, but a corporate responsibility for the planning and development sector to address this important market in Scotland.
Savills research states the number of people aged over 65 is set to increase from 550,000 to 1.4 million by 2037, an increase of at least 100,000 every five years. This unprecedented level of growth will be spread geographically and will have important implications for housing across Scotland.
The findings reveal that the average transaction value in Scotland (in the year to March 2016) was £166,624, compared to £250,000 across the UK as a whole. Therefore, whilst a considerable number of over 65s own their property outright in Scotland, it is unlikely that many people will able to release large amounts of equity.
The sale of the family home in Scotland often generates lower levels of equity for downsizers and retirees compared to other parts of the UK, which simply means this target group of consumers has less to spend. Therefore a model that works in say London, Bath or Bristol cannot simply be replicated in Edinburgh or Glasgow. The challenge for developers operating in the retirement sector in Scotland will be providing desirable properties at attainable prices.
A two-tier approach is required which will cater both for downsizers operating at the top end of the market, but also for more modest retirement housing. So, although there are challenges for developers in terms of value, the demographics indicate a huge untapped opportunity for the right product for the right buyer.
The research indicates Scottish planning policy has provided a further challenge, yet could also play a pivotal role in addressing the impact of demographic changes on housing demand.
The demand for housing land has never been greater, and the planning system is key to unlocking the potential for delivery.
The Scottish Government explicitly requires local authorities to meet the housing needs of older people. Despite this, there is no definitive and specific planning policy to deliver retirement housing, and as a result we are seeing an inconsistent approach to local planning authorities’ interpretation and application of SPP, particularly in relation to developer contributions, policy preparation and also the inclusion for specific retirement housing in HNDA’s. It is encouraging that the review of the Scottish Planning system, published last month (May 2016) has highlighted the need for future proofing in relation to this issue: specific retirement living policy is now required to take this forward.
Finally, developers must compete for prime development land in high demand locations. The downsizer market is driven by aspiration; the desire for a high quality, mortgage-free lifestyle in desirable areas, often near the family home, family members and good local amenities.
Yet despite competition for the best sites, retirement providers are able to compete against traditional house builders, due to opportunities for schemes comprising denser layouts with reduced parking requirements.
Scotland and indeed the rest of the UK can learn great lessons on the delivery of substantial levels of retirement housing from Australia, New Zealand and America – these countries have been able to deliver homes allowing people to age in desirable places, across different price points and different tenures. The key driver has been a planning system that supports retirement housing, and funding to allow the developments to be built.