50% reduction in later living planning activity across the UK

The government has issued strong guidance advising buyers and sellers to delay their purchases unless the property is vacant or they are contractually bound to continue a sale and both parties cannot reach an agreement to postpone. In effect, the housing market is now frozen.

This has brought a far more extreme plummet in sales than was seen after the financial crash of 2008. Since lockdown began, agreed transactions have dropped by 92%, as reported by Zoopla. Commentators are predicting anything between a 5% to 20% reduction in house prices and The Royal Institution of Chartered Surveyors’ monthly survey of price expectations has just recorded its largest drop since 1998.

These circumstances are having a direct impact upon the later living sector. There has been a reduction of 50% in the number of planned new build units validated in March 2020 compared to the monthly average since January 2019. We predict this fall will continue over the next 6 months, given the lack of activity within the residential housing market. To put this in context, 2019 saw 15,000 new build later living units enter the planning system; the forecast this year could be as low as 7,500.

Despite this evidence, several well-funded operators continue to pursue their development pipelines. In 2020 so far, five applicants (McCarthy & Stone, Guild Living, Inspired Villages, Adlington and Cinnamon Retirement Living) are responsible for around 40% of the units in the planning system. It is these types of operators who may be well placed to take advantage of the current climate and get ahead of the planning process, which can sometimes take up to 2 years to complete. The general reduction in planning applications across the property world will mean a little extra resource for new applications for well-equipped planning departments. We are already seeing reduced timescales achieved for requested pre-application consideration. Furthermore, with the social care sector in the media spotlight at present, it is difficult to argue a lack of need for these facilities, especially those schemes providing care, amounting to about 70% of the units in new applications validated in 2020 so far. Finally, the decision to grant permission to Inspired Villages to redevelop the former L&G headquarters in Kingswood was a welcome statement that planning decisions can still be forthcoming in this climate.

Audley’s Nightingale Place is now open, and we hope that once social distancing measures and other guidelines are relaxed, previously interested buyers will have the confidence to make the move given the lack of high-quality stock in the Capital. However, it would be unwise to assume a pre-Covid 19 sales velocity. Therefore, we predict an increase in operators offering units for rent, like Birchgrove and the Hawthorns brand of Avery Healthcare, to assist short term cash flow. Buying into a falling market brings the risk of reducing the potential inheritance to pass on to the next generation, which will be important to many prospective residents. These schemes will enable residents to rent out their existing houses and move into a community which can offer the support that they need, without affecting the children’s inheritance or being tied up in the current housing slowdown.

Month application validatedNet units (with care / facilities)Net units (without care / facilities)Total net units 
January 20208443561,200
February 20208433311,174
March 2020317172489
1 - 12 April 202088694

Sources: Glenigan, Egi, Planning pipe, Carterwood Analytics

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