By Robert Liebman
With property prices soaring, many parents have been helping their children get onto the property ladder. Given such high prices, however, maybe grown-up children should help their parents get off of the ladder.
Left to their own devices, ageing parents tend to put off the inevitable, often leading isolated lives in houses that are large and difficult to maintain. When they finally do move, frailty or financial pressures may have left them no choice. Such forced moves also tend to be costly.
In fact, early downsizing can have enormous social and financial benefits. Modern retirement developments provide a ready-made community. They also offer a range of amenities that cater for the varying levels of fitness found in today’s increasingly youthful ageing population.
But elderly people, comfortable in their family homes and fearful of change, often see only upheaval and no benefits in moving.
They tend to be unaware both of the social benefits and financial advantages resulting from a wise timely downsizing.
Grown children can explain these realities, and their children in turn –internet-savvy grandchildren – can do the research and provide the supporting details.
With downsizing, the entire value of the family home remains with the owner instead of being surrendered to a lender via equity release. The parents also get to live in a property more suitable to their current and future physical and emotional needs. And the large family home goes to a proper family.
Something for everyone
Consider Denham Garden Village , a retirement scheme on a plot large enough to comfortably contain more than 300 homes, plus 30 acres of private woodland for the exclusive use of the residents.
This community is self-sustaining: it has its own shops, restaurants, swimming pool and hairdresser; its library has internet access; and there is a GP surgery on the premises.
When it is cold or wet outside, residents can retire to the Winter Garden atrium, a spacious, naturally ventilated, all-weather area. Small rooms are available for groups to play bridge or chat, and a large room is available for special community events.
Perhaps most surprisingly, given its size and rustic ambience, Denham Garden Village is located in Greater London, only three miles from Uxbridge. Denham and Uxbridge enjoy bus links, the buses are wheelchair-accessible, and Uxbridge is on the Underground network.
Denham Garden Village is run by Anchor Trust, a registered social landlord and charity, England’s largest not-for-profit provider of housing, support and care.
Property types in the development range from small flats to terraced houses with manageable gardens. Currently available as 2007 draws to a close are bungalows from £370,000. Service charges total about £1,000 per year, and there are additional charges for repairs.
Richmond Villages
For a genuine rural setting, private developer Richmond Villages has just launched a development of flats and care apartments in the Cotswolds in Painswick, Gloucestershire.
This scheme consists of 18 two and three-bedroom independent apartments and one and two-bedroom serviced apartments providing hotel-style services and care. Also available are 24-hour care bedrooms on a weekly basis.
Independent apartments start at a hefty £429,000, and service charges of £80 per week are additional.
Serviced apartments are much cheaper, starting on £199,000, but the additional fees are higher, reflecting the greater levels of service: food, beverages, daily maid service, laundry and the like amount to £318 per week for one person. This fee is in addition to the standard service charge.
Richmond Villages was founded in 1993 and opened its first development, in Nantwich, three years later. Another Richmond Villages development will soon launch in Northampton, with independent apartments from £275,000.
McCarthy & Stone
For many retirees, only the coast will do. In Bridlington on the Yorkshire coast, veteran retirement specialist McCarthy & Stone has converted a former engineering works near the high street into a block of 36 apartments.
The 26 one-bedroom units are priced from £136,950, and the 10 two-bedroom units from £165,960. Moderate service charges are extra.
The development’s facilities include a communal lounge, laundry room, landscaped gardens, 24-hour emergency Careline in all apartments, video surveillance of front entrance in all apartments, and a residential house manager. There is also a guest suite for visiting family members.
The bottom line
Jackie Eltis, general manager at Denham Garden Village, says that her typical purchaser has sold a home for between £600,000 and £2 million. In other words, the ‘poorest’ of these downsizers has at least £100,000 left over after they have purchased a relatively expensive retirement flat or house. Most have considerably more, either because they spent less on their retirement property, or because their family home had more equity.
How much does £100,000 earn if it is invested safely – in a manner that ensures that the capital is secure but the money earns more than an ordinary savings account?
Independent financial adviser James Davison of IFG Financial Services says: “As a rule of thumb, 5% per year is what investors should achieve without risking their capital. But remember that service charges tend to go up at a higher rate than inflation.”
So, the low-end downsizer who sold for £600,000 and buys for £400,000 earns about £10,000 per year on the investment income from £200,000.
In other words, typical downsizers in Denham Garden Village can easily pay the service charges out of their investments income – income based purely on the cash liberated from the sale of the family home. And as they are not mortgaged and have not surrendered any of their original home’s equity, their entire estate remains intact. The whole family benefits – grandchildren as well as children.
So far, so good. But retirement developments vary in numerous ways. Some, for example, take a commission (resale fee) when the property is sold. All have complicated leases. Some excel at catering for grandchildren or pets, and others do not.
The small print and financial arrangements can be complex. This is another area where adult children can make life easier for their parents.
This article was published on 6th November 2007