Although relatively young, the housing market for elderly people over 75 who are still self-reliant will see a significant boom over the next few years, carried by a positive socio-demographic and economic framework.
This increased need is inevitable with the ‘baby-boomer’ generation. In France, the 75–95 age bracket is expected to grow by 111.3% between 2015–2070 according to projections from INSEE.
While people are living longer (two years longer over the space of 20 years), 38% of them age alone and may have to look to retirement homes. Attracted by the south-western regions, 47% of elderly people want to live near close friends and family. They also prioritise practical elements (36%) and the quality of living conditions in general (30%). The home is by far the preferred option for the elderly with 92.5% of beds and the share of non-medical residences still low, with only 1.3% of beds. But, the retired population will most likely double by 2020, compared to 2014. The preferred housing type for elderly people is a furnished two-room flat.
A positive demographic framework to develop retirement homes
This increased need is inevitable with the ‘baby-boomer’ generation. In France, the 75–95 age bracket is expected to grow by 111.3% between 2015–2070 according to projections from INSEE.
While people are living longer (two years longer over the space of 20 years), 38% of them age alone and may have to look to retirement homes. Attracted by the south-western regions, 47% of elderly people want to live near close friends and family. They also prioritise practical elements (36%) and the quality of living conditions in general (30%). The home is by far the preferred option for the elderly with 92.5% of beds and the share of non-medical residences still low, with only 1.3% of beds. But, the retired population will most likely double by 2020, compared to 2014. The preferred housing type for elderly people is a furnished two-room flat.
A rise in financial means for elderly people
Pension figures have been rising steadily for the last 10 years, while the bracket for people 75 years old and over benefit from APA (financial aid allocated to help dependent persons living at home or in accommodation) fluctuates between 11 and 27%, depending on the region. The elderly can also rely on inheritance to complete their retirement: the proportion of money inherited by people aged 75 years and over, was around 20.8% in 2006 — twice more than the global adult population (10.8%). However the rate of elderly people living below the poverty line is lower overall, than for the French population as a whole.
The senior housing market: a positive economic environment for investments in alternative assets
The construction industry dynamic (13.5% on annual average) has enjoyed low prime returns rates since 2014 which propels institutional investors to orientate themselves around more profitable alternative assets. And while the share of conventional housing went from 30% to 12% between 2000 and 2016, alternative assets, such as residential services, have doubled, growing from 4 to 8% over the same period. In this period of economic recovery and a growing older population, the industry should see an important uptake.
An expected peak in retirement homes services
In 2017, there were 620 active retirement homes accounted for: 47,000 buildings largely concentrated to the Atlantic coastline, Mediterranean area and Paris.$
In a setting where public bodies dictate the large majority of construction permits, market buyers increase the projects on offer. The market should progress from 23% in 2019 to between 16 and 26% in 2021. Projects for retirement homes (82 houses in total) are mostly located in cities, notably Paris, Lyon, Bordeaux, Lille and on the south-east coast.
Retirement homes: a low-risk investment for renting
Running retirement homes relies on a commercial renting model, whereby only the landlord, who sublets to retired people, risks unpaid rent, vacancies, and building taxes. The investor should seek to should assure the finial viability of the landlord, and the quality of the site in regards to resale. In this aspect, investors are sensitive to socio-economic criteria such as land typology, earnings of the retirees, poverty rate, and the proportion of dependent persons.
Key indicators include the demographic evolution of elderly people over 75 years and more, and senior citizens living alone, as well as the market depth and growth rate. In this macro ranking, a second micro-analysis should be conducted for each asset studied.