With the UK's ageing population projected to increase, the market for later living homes continues to evolve and, with its potential for growth, investment interest in the sector can be expected to continue to gain momentum in the years ahead.
Demand for later living options set to rise
As noted in the Final Report of the Older People's Housing Taskforce (Taskforce Report), almost one in five (18.6%) people in England are aged 65 and over and, by 2066, this figure is projected to rise to over one in four (26%). Further, according to recent research by Savills, owner-occupiers aged 60-plus hold a record estimated £2.89 trillion of net housing wealth in homes.
With these projections, demand for later living options is set to rise. Yet, current supply in the UK is insufficient to meet this anticipated need. The amount - and pace - of investment in the sector needs to rapidly increase and, as the market evolves, we are seeing increased investor interest in the opportunities later living could present (for example, as seen in the recent merger between Audley Group and Elysian Residences, which included external investment from institutional funds). Beyond any potential economic opportunities, the sector also offers a significant social element which can be added to an investor's ESG profile.
The evolving market
Traditionally, the UK's later living options were limited. Most people lived at home until necessity required them to move into a care home. However, the market has evolved in recent years with integrated retirement communities (IRCs) presenting an alternative option that can offer a range of potential benefits for residents, as well as broader society. For example:
- Health and well-being: IRCs may help people live happier and healthier lives and, in turn, this can ease pressure on the NHS and other services (fitting into the Government's broader health mission and plans for NHS reforms, which include an emphasis on prevention and community care).
- Right sizing - The Taskforce Report notes that nearly 9 in 10 people aged 65-79 live in under-occupied housing, with over 50% living in homes with two or more excess bedrooms. Suitable and attractive later living options which offer a positive lifestyle choice - rather than a move out of requirement - can help release these in-demand family homes.
Despite improving delivery (according to Knight Frank's UK Seniors Housing Market Update Q1 2025, there has been 11% growth in the supply of IRC homes over the last 5 years, outpacing the 4% increase in overall seniors housing supply), the market will need to continue to evolve and expand based on anticipated demand and consumer requirements.
Flexibility and affordability will be key. For example, demand for rental options is set to grow and, according to Knight Frank's update, the number of senior housing units with market rent as the primary tenure has increased by 24% over the past 5 years. This need for a range of options is perhaps also recognised in the fact that the recently introduced ban on leasehold houses excludes retirement living. Meanwhile, to address concerns as to affordability, there is increasing awareness amongst providers of the need to offer a variety of offerings at different price points to appeal to different segments of the market and a variety of payment options (including lowering annual charges and raising deferred payments on sale – a model which is increasingly being deployed in the UK and has proven successful in other jurisdictions) to help boost consumer confidence.
Considerations for later living developments
As with any sector, there are a host of considerations involved in developing, or investing in, later living developments, including:
- Public perception: Raising public awareness of the later living options available is an important factor that will influence the future success of this sector. Whilst operators will inevitably need to consider their own marketing strategies (and ensure they are reaching – and resonating with - their target demographic), if the Government is to deliver on its aim towards greater community care, they too have a vested interest in changing perceptions and improving public understanding of the different options available. Rather than being seen as that final move out of necessity, there needs to be a broader societal shift in perception of what later living can be, and the health and well-being benefits it can offer. Something, perhaps, a certain group of mystery-solving retirees hitting the screens might help with!
- Construction: It is worth noting that the construction and occupation phases of the Building Safety Act 2022 (BSA) apply to retirement living properties unless they quality as care homes (defined as buildings which provide accommodation, together with nursing or personal care, for those who are or have been ill, mentally unwell, or dependent on alcohol or drugs or who are disabled or infirm). In those circumstances, whilst they may be caught in the construction phase, they are excluded from the BSA's occupation phase requirements even if the building in question is a 'Higher Risk Building'.
- Suitable Sites. Sites need to be carefully selected, requiring sufficient space to offer the desired on-site facilities and services, whilst also being close to transport and healthcare infrastructure and the local community. This, combined with planning challenges, means that the availability of suitability of appropriate development sites can be limited.
- Operations and viability: Against a backdrop of higher initial capital outlay to accommodate the more specialist infrastructure requirements and extensive services, sourcing operational expertise and increasing operational costs across the healthcare sector is often cited as a challenge to be overcome. Implementing a business model which balances consumer expectation and affordability, whilst also maintaining growth and profitability, is likely to continue to be a fine balancing act.
- Technology: Advances in healthcare technology, the use of AI and remote medicine present evolving opportunities and challenges which will need to be navigated. On the one hand, the increasing combination of technology and life sciences is bringing a host of benefits which will help the later living sector. Many of these developments (eg. wearables) are set to make the remote provision of care easier, relieving pressure on healthcare infrastructure and allowing people to remain independent for longer which, in turn, may increase the availability of different later living options (including to those who may need a higher level of care than others). More generally, technology is improving business operating efficiencies which may ease cost pressures. On the other, the expanding use of technology – particularly when used in healthcare context - inevitably exposes businesses to increased risk which will need to be managed (including an increasingly complex regulatory environment, data protection / cyber security - of particular importance for sensitive medical data - and the potential impact should any technology fail).
What is clear is that the UK needs to rapidly increase supply of later living housing, alongside a broader societal shift to raise awareness of the options available and challenge existing perceptions of what later living housing offers. Despite the challenges to overcome, we are seeing – and expect to see – investors willing to navigate them in the hope of capitalising on the opportunities later living investment might offer, which can only be a good thing for the housing market and healthcare systems alike. As an essential component of the future health aims and the current Government's plans for NHS reform, it will be interesting to see if the sector receives increasing attention (and possibly even additional investment incentives) in the years to come.
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