Few buyers in their seventies are looking to make a killing from their retirement home. Instead, they are looking for a safe environment in which their life savings will be secure.
Two new retirement villages are currently offering a buy-back guarantee, by which they repay you or your estate the full price you paid for your home and they take responsibility for finding a new buyer. They refurbish the property and sell it on. In a rising market they stand to make the capital gain; in a falling one they may lose. The buyer only loses if the company goes bust.
The policy was pioneered at Elmbridge Village in Cranleigh, Surrey, a development that opened 14 years ago, of more than 200 homes around a converted school building. "It wasn't such a strong marketing tool in those days," says Ray Brown, the managing director of Elmbridge Village. "Our motivation was to keep control over the estate."
And, of course, to make money. Despite the booms and slumps of the intervening years Elmbridge prices have held firm. The bungalows which originally sold for around pounds 50,000 now change hands at pounds 120,000 and the development is always full. The company is just completing a second village at Chorleywood in Hertfordshire centred on a Grade II listed mansion. With the builders not yet finished, they have already sold all except two of the cottages and bungalows and two-thirds of the apartments at Cedars Village. Three more villages are in the pipeline, one in the north of England and the others near the M25.
Pauline Burden was one of the first people to move into Cedars Village in Chorleywood last week. She bought a two-bedroom apartment, linked to the main house, for pounds 95,000. Though it is small, compared with prices for apartments without any facilities in that expensive part of Hertfordshire she thought it was good value.
"It was the environment I bought," Mrs Burden says. "I've travelled a great deal in the United States on business. It's a concept they have had for years. I can walk from my apartment to the wonderful public rooms and facilities."
How does she feel about the buy-back guarantee? "I have many friends who have had their properties on the market for years. I would rather know that six weeks after I wanted to move out I would get my money back."
A similar scheme is being offered to buyers at Avonpark near Bath, though it applies only to those who move into a block of "Close Care" apartments, rather than those who live more independently. As with Cedars Village, you forfeit 5 per cent of your capital if you leave within the first two years. A one-bedroom apartment costs around pounds 70,000 with service charges pitched at between pounds 1,500 and pounds 2,000 a year - the same as Cedars Village.
The man behind Avonpark is Hudson Cooper, a South African with a background in the hotel business. He says: "In a retirement village you can provide very economically the support systems that allow people to live longer independently."
So what are the potential pitfalls of a buy-back guarantee? Stephan Miles-Brown, of Knight Frank & Rutley, says: "It's a cash-flow exercise. The developer funds his next phase of work with your money. Would you get your money back if the market turned down?" he asked. "You have to ask yourself why a developer is offering this. Is it because they are charging a premium?"
It is hard to compare prices directly, but it would seem not in this case. Most of the up-market retirement developers look for sites in prosperous towns within walking distance of the shops. Retirement villages are in cheaper, out-of-town locations. Two of the leading developers, Pegasus and Beechcroft, often provide swimming-pools as a central facility, but less in the way of public rooms and grounds. At the award-winning Pegasus Grange development in Oxford a two-bedroom apartment costs between pounds 120,000 and pounds 160,000. At Great Missenden in Buckinghamshire, where Beechcroft has converted an old farmstead, prices start at pounds 180,000 for a two-bedroom cottage. At Cedars Village in Chorleywood, a two-bedroom apartment at pounds 90,000-pounds 110,000 does not look excessive.
Most developers think older people will be slower to forget the stigma of renting, but that it will become more popular. At The Dell in Glasgow, Quality Street, the nationwide rental chain, found every one of its tenants was a former owner occupier. It took a year to overcome prejudice against renting and fill all 33 apartments, but now they have a waiting list. "Renting gives people flexibility," says Lorraine McQueen of Quality Street. "It gives them the chance to enjoy their money while they are able and their family is not left with an apartment to sell."
Despite the recession the retirement market is maturing rapidly. Developers are targeting those first-generation owner occupiers, now in their fifties and sixties, many of whom have large old properties to sell.They may be looking for something smaller and easier to maintain, but they still expect it to be smart.
There is a proliferation of up-market developments offering "cottages" and bungalows with libraries and swimming-pools. The perceived wisdom is to sell buyers an a la carte system, where they can order in extra services such as laundry, cooking and nursing when necessary. It is much easier to sell than a block of flats that looks only one step away from a nursing home.
Agents for Cedars House, Chorleywood, are Hamptons (01923 776291); Avonpark apartments from Savills (01225 444622); Pegasus in Oxford (01865 204834); Beechcroft's Great Missenden development from Hamptons (01494 863134); Quality Street, Glasgow (0141 248 4553).Reuse content