Demographic change is fundamentally changing the demands on the German housing market. However, living in old age is not a uniform market: While the majority of senior citizens continue to live in their previous living environment, the need for barrier-free, service-oriented and care-oriented forms of living grows with increasing age. In the webinar “MACRO MATTERS – The KINGSTONE Real Estate View”, Maximilian Radert, Head of Product Development & Research at KINGSTONE Real Estate, Prof. Dr. Günter Vornholz, founder of ImmobilienResearch, and Jean Klijnen, Managing Director at KINGSTONE Real Estate Benelux (KREBLX), discussed the question of how demand, supply and investability are developing in the segment of living in old age.
Living in old age is predominantly not a special form of housing
The market for senior living is often discussed about special forms of housing – such as serviced living, assisted living, senior citizens’ residences, multi-generational concepts or nursing homes. In fact, the vast majority of older people continue to live in their previous home. “I would not have thought that 95 percent of people would continue to be in their normal homes and that these special forms would only make up a small part,” said Prof. Dr. Günter Vornholz.
This so-called remanence effect characterizes the German and Dutch markets: Older people want to maintain their familiar living environment, neighborhoods and routines for as long as possible. In addition, a move is often associated with considerable costs. Anyone who switches from a long-term lease or from a paid-off property to a new service or assisted living offer is often confronted with significantly higher new contract rents and additional service fees.
A market with very different needs
The demographic development is by no means uniform. While the group of younger seniors will initially continue to grow in the coming years due to the baby boomers, it will shrink again by 2040 when fewer baby boomers will follow. The development is different for the very old: Here, a further increase in demand for care-oriented and barrier-free forms of housing is to be expected until around 2050. For project developers, operators and investors, this means that not every offer that falls under senior living today addresses the same demand. Service-oriented forms of housing, nursing homes, low-barrier existing apartments and communal living models follow different usage logics.
In addition, the demographic development also differs greatly from region to region. Structurally weaker regions are often more affected by ageing because younger people migrate to larger cities for training and work. At the same time, demand is shifting in medium-sized cities, peripheral areas and well-connected surrounding areas. The Netherlands shows similar patterns. University cities such as Amsterdam, Rotterdam, Maastricht, Groningen or Eindhoven have younger population structures, while smaller cities and peripheral regions are already more strongly influenced by senior households. At the same time, mixed forms are increasingly emerging there, such as housing concepts in which students and older people live together and support each other in everyday life.
Accessibility in existing buildings as the key
Since new construction accounts for only a small proportion of the total housing stock, the age-appropriate conversion of existing apartments and buildings is becoming increasingly important. Barrier reduction can help older people stay longer in their homes and care needs can be better organised.
“We always have to see: What does the senior actually need in terms of barrier reduction? Are all the criteria necessary or is a smaller measure not enough to be able to continue living in the apartment – for example, a walk-in shower?” says Prof. Dr. Günter Vornholz.
For investors and portfolio holders, this results in a double task: On the one hand, new construction products must be created for different age and income groups. On the other hand, pragmatic concepts are needed for existing buildings – from low-barrier access and adapted floor plans to services that offer security of supply without overburdening older households financially.
Senior living as an investment case – but not a sure-fire success
From an investor’s point of view, living in old age remains a relevant task for the future. Structural demand is growing, but at the same time the market is fragmented, highly regulated and dependent on regional purchasing power, care and supply structures. A growth market therefore does not automatically have to be a mass market, Maximilian Radert emphasised.
“In the Netherlands, where institutional investors and pension funds are already investing more in senior living and nursing homes, senior housing and nursing homes generally offer good returns. But we need a stable political climate and stable capital markets. Scarcity creates returns – but the risks must be manageable,” says Jean Klijnen. Klijnen also emphasized the importance of diversified investment strategies. The combination of classic residential, age-appropriate senior residential and care-oriented senior living concepts could combine stable current income with additional upside potential. At the same time, such an approach addresses the different housing and care needs of an aging society.
Result
Living for the elderly is a structurally growing but differentiated market segment. The demand arises from very different life situations, asset situations, care needs and regional developments. The majority of senior citizens will continue to live in normal apartments in the future. At the same time, the need for barrier-free, service-oriented and care-related offers is growing – especially for old seniors.
