Retirement living is becoming increasingly attractive to operational real estate investors. That’s not because they dream of spending more time in the garden or on the golf course, but because of the potential scale of this expanding market as it matures into a liquid, mainstream asset class.

Institutions and REITs (Real Estate Investment Trusts) are already active in the more established care home sector but interest is broadening. A market for retirement housing investment is now emerging too, worth just under £100 billion today and an estimated £244 billion at maturity.

To put that into context, we have calculated the value of housing currently owned and occupied by the over-65s to be more than £1.6 trillion. Much of the increase in the value of the retirement housing sector could be funded through older people choosing to downsize. The challenge here is to provide a product that can tempt them out of a home they have likely lived in for decades.

The bulk of the existing 730,000 retirement housing units across the UK is sheltered housing for social rent, built using grant funding in the 1970s and 80s. Much of the balance is made up of owner-occupied homes, delivered by specialised housebuilders such as McCarthy & Stone, who has only recently started to offer rental options within its developments.  

Accounting just for today’s over-75 population, we anticipate that retirement living could grow to 1.7 million homes at full maturity – an increase of 138 per cent over current stock. If you take into account population growth, then the number would be even higher. Additional stock will be a mix of market sale, intermediate and privately rented homes.

The potential benefits of a larger retirement living sector are substantial. Offering desirable homes in retirement villages that allow people to age in place can reduce the nation’s social care costs and address feelings of isolation and loneliness as well as free up much-needed family housing.

The rules are still being written across this sector. An ageing population with vast stores of housing wealth will underpin demand for well-managed, tailor-made housing options. How we deliver those homes is yet to be determined.

Further information

Read more: The sky's the limit? and Retirement living