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The retirement home scandal that is wiping out life savings

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When Kathleen Smith died at the grand old age of 90, she would have been proud to leave behind a successful son, four beautiful grandchildren and a six-figure inheritance to make life for them that little bit easier.

‘She bought a retirement flat for £124,000 in 2006 and died eight years later, probably thinking it had gone up in value like most other properties in the country,’ says her son, Michael, an Oxfordshire-based academic. ‘Isn’t that what we all want to do — leave something behind for our loved ones?’

Kathleen probably would have been horrified, then, to find out that it took seven years to sell her home — and that during those difficult years, her family was forced to pay almost £16,000 in council tax, service charges and ground rent to retain ownership of it.

Huge losses: Kathleen Smith paid £124,000 for a her retirement flat in 2006. Her family only managed to get £60,000 for it when they finally managed to sell it this year

Huge losses: Kathleen Smith paid £124,000 for a her retirement flat in 2006. Her family only managed to get £60,000 for it when they finally managed to sell it this year

The one-bedroom flat, in Oswestry, Shropshire, finally sold two weeks ago for just £60,000. 

That’s a £64,000 reduction in her legacy, even before taking into account those service charges and the house price inflation she would have achieved if she had bought a non-retirement flat anywhere else in the town.

But she hadn’t. Like tens of thousands of other retirees, she had bought a flat sold by Britain’s biggest retirement housebuilder, McCarthy & Stone. ‘We found that nobody would touch this kind of property with a bargepole,’ says Michael, 73. 

‘The service charges are so high and the market had been flooded with homes that were hyped when they were first sold at prices that must have been inflated.

‘All over the country, people are losing huge sums of money as they find out that the flat their parents bought as an investment has plummeted in value.’

Retirement housing has not been as widely embraced in the UK as in other countries, not least because of reputational problems caused by leasehold sales models that resulted in buyers having ever-increasing service charges foisted on them.

Here, only 2 per cent of over-65s live in designated retirement properties, compared with 12 per cent in the U.S. and Australasia.

Leasehold models mean that while your lease gives you a fixed length of time to live in your flat, the building itself is owned by a freeholder. 

In its properties McCarthy & Stone has created the freehold but has often sold it onto an outside investor which sets service charges to cover maintenance, repairs and insurance. Rights to ground rents are usually sold off too though these are often fixed in the lease.’

According to the McCarthy & Stone website, a typical service charge is £48.93 a week for a one-bedroom apartment and £73.36 a week for a two-bed — based on one of its properties in Sanderstead, Surrey. These fees are reviewed every year.

There are often age restrictions on retirement properties, which can make them more difficult to sell. 

McCarthy & Stone’s website says it offers three type of developments, which are exclusive to over-55s, over-60s and over-70s respectively.

Unwanted: Kathleen Smith's one-bedroom flat, in Oswestry, Shropshire, finally sold two weeks ago for just £60,000

Unwanted: Kathleen Smith’s one-bedroom flat, in Oswestry, Shropshire, finally sold two weeks ago for just £60,000

‘Retirement housing in the UK is a failure and the elderly are deeply — and rightly — sceptical about downsizing to designated retirement housing,’ says Sebastian O’Kelly, founder of the campaign group Better Retirement Housing.

‘They are quite right to be sceptical. Retirement housing has been a snake pit of rip-off practices and absolutely abysmal resale values.

‘Buying a retirement flat can be the single worst residential property investment one can make in the UK.’ He says falls in value of up to 70 per cent are not uncommon.

Our findings come as older homeowners are under pressure to downsize to free up family homes. 

Housing Minister Chris Pincher last week told the House of Lords that almost four in ten properties are ‘under-occupied’ and could be better used by younger families with children. 

And he said the Government was keen to encourage housebuilders to create more developments suitable for pensioners.

Lease letdown

According to Mr O’Kelly, the main reason for often dire resale values across the sector is the ‘housebuilder business model’.

He says: ‘You build a block, sell out the flats for what you can get using a slick marketing operation, include long-term revenue streams in the lease — such as ground rents, exit fees and subletting fees — ensure the lease is for only 125 years and then sell the freehold on to an investor.’

Shock: Kathleen' son Michael struggled to sell his mother's flat for seven years

Shock: Kathleen’ son Michael struggled to sell his mother’s flat for seven years

Future owners will have to pay to extend their lease, usually before it drops below 80 years, and this can cost tens of thousands of pounds. 

‘Add to this predatory management fees through the service charges and the sale of these flats can be problematic,’ adds Mr O’Kelly.

McCarthy & Stone was founded by John McCarthy and Bill Stone in 1963. By 1996, the company had cornered 70 per cent of the retirement market. 

By 2004, as a listed company, it was recording pre-tax profits of £114 million and both men had sold their shares in the company. 

On its website, the firm says it has built 58,000 retirement homes in 1,300 developments. 

In 2006, it was taken private by a banking consortium for £1.1 billion before being listed on the Stock Exchange again in 2015.

Earlier this year it was bought by the U.S. equity company Lone Star for £647 million.

Big losses 

Most of the problems relating to McCarthy & Stone flats go back to before 2010, when company policy was to sell off freeholds to financiers who were then able to increase service charges. This, in turn, made many properties unattractive to potential buyers.

After 2010, the company began retaining ‘headleases’, which means it controls management to prevent excessive service charges being imposed. And it now sells 999-year leases, a practice that has ended the need for residents to pay for lease extensions.

But the company’s improved policies post-2010 provide scant comfort for families whose parents bought before they were adopted. 

Retired college lecturer Jane Weake’s in-laws, Arthur and Betty, bought a McCarthy & Stone two-bedroom apartment in Risingholme Court, Heathfield, East Sussex, for £273,950 in 2007. Betty died shortly afterwards aged 89, and in 2012, Arthur moved into a care home.

‘He tried to sell the property for four years, but there were no takers because the service charges were so high — £9,000 a year to Peverel [now FirstPort], the management company appointed after McCarthy & Stone had sold on the freehold,’ says Jane, 68. 

‘Arthur died in 2016, aged 103, and it took us another four years to sell the flat after that — for just £50,000. 

For the four years he was no longer living in the flat, and the four years after his death, subsidies on meals he wasn’t eating, and cleaning he wasn’t receiving were still included in the service charges.’

In total, the loss of equity and service charge bills amounted to more than £290,000 for Jane and her family.

‘My father-in-law would have been devastated if he had known that this is what happened to the inheritance he had planned for us,’ says Jane.

Taking a big hit: This retirement apartment in Heathfield, East Sussex, cost £273,950 in 2007 but was sold last year for just £50,000 because the service charges were so high

Taking a big hit: This retirement apartment in Heathfield, East Sussex, cost £273,950 in 2007 but was sold last year for just £50,000 because the service charges were so high

Companies such as McCarthy & Stone (recently rebranded as ‘McCarthy Stone’) point out with some justification that buying into a retirement community represents more than just an investment; there is the help at hand, the company and camaraderie.

Retired maths lecturer Ken Playforth, 90, would agree — but he is angry, too, at what he sees as excessive ground rents and service charges imposed once freeholds had been sold on to outside investors.

And all the while, the value of flats in his McCarthy & Stone development in Leeds, Rosewood Court, are plummeting. His flat, which cost £199,000 in 2004, is likely to be worth a little over half that figure today.

According to Land Registry records, flats there have performed very badly. One bought for £210,000 in 2005 sold for £125,000 in 2020. 

Another bought in 2005 for £133,000 sold for £77,000 in 2019. And two others bought in the same year for £162,000 and £188,000 sold for £100,000 and £126,000 respectively.

‘My wife, Ann, had dementia and died in her late 70s,’ says Ken, ‘and if I hadn’t been living here, things would have been so much more difficult for me.

‘There is the support and friendship, the activity, facilities and social life, and that got me through some hard times. So, yes, I would say it has improved my life enormously. But the financial side of things has been disastrous.’ 

Ken says the loss of equity has been ‘awful’ and he regards his £450-a-year ground rent and £3,700 per annum service charges as excessive, but he has been able to set aside something to bequeath to his 69-year-old son, Michael, his five grandchildren and three great-grandchildren by making other ‘safer’ investments.

Falling prices

It would be unfair to say that a majority of McCarthy & Stone developments have failed to retain their value (particularly recent developments) — but in less than three hours of searching on property websites, I found 20 of its retirement communities, in Dorset, Kent, Derbyshire, Tyne and Wear, the West Midlands, Gwent, Leicestershire, Merseyside, West Yorkshire, Cornwall, Gloucestershire and Greater Manchester, where the value of homes had gone down, in most cases considerably.

In Britain only 2 per cent of over-65s live in designated retirement properties, compared with 12 per cent in the U.S. and Australasia

In Britain only 2 per cent of over-65s live in designated retirement properties, compared with 12 per cent in the U.S. and Australasia

Not all of these dated from before 2010. Some built in later years are also generating big resale losses for owners and their families. 

Among them is Jenner Court in Cheltenham, Gloucestershire, built in 2013, where most resales have been at considerable reductions. 

One bought in 2014 for £330,000 sold for just £280,000 in 2019. Other flats have incurred losses of £70,000, £50,000 and £30,000.

San Lorenzo Court in St Ives, Cornwall, also built in 2013, has seen flats sold for £102,000, £45,000 and £30,000 less than was paid for them. 

Homeowners in Somers Brook Court in Newport on the Isle of Wight have experienced reductions in sale prices of £90,000, £74,000 and £55,000 between 2014 and 2021. And at Saxon Grange in Chipping Campden, Gloucestershire, prices have fallen, too.

One flat, bought for £399,000 in 2013, sold for £200,000 in 2020 — a loss of just under £200,000 in seven years. 

One bought for £356,000 in 2014 sold for £225,000 in 2018, and another, bought for £365,000 in 2013, sold for £250,000 in 2021 — a 32 per cent loss in eight years.

Sir Peter Bottomley, who has campaigned for the reform of leasehold law for many years, says; ‘In the past, McCarthy & Stone had a very bad reputation that was fully deserved. 

‘The firm should put in funds to compensate people who own properties where there are reasonable grounds to suspect exploitation.’

More questions 

We asked McCarthy & Stone CEO John Tonkiss how, in an economy where property is supposed to be a sound investment, he could account for these losses.

We also asked him whether the company felt inclined to apologise to families who have lost their inheritance — and whether he might consider setting up a fund to compensate them, not least because two months ago the company received £94 million in public funding from the Government house-building agency Homes England to build 1,500 affordable retirement properties.

He did not reply. Instead, he got a public relations firm to issue this statement: ‘McCarthy Stone does not retain any involvement with Rosewood Court, Leeds; Risingholme Court, Sussex; Abraham Court, Oswestry. 

All McCarthy Stone developments from before 2010 are under FirstPort’s care as the managing agent.

‘In 2010, we ended our relationship with FirstPort, who are a third-party managing agent, because we wanted to deliver our own management services function to ensure the level of service and quality of the development could be kept at a very high standard. 

‘We’re therefore unable to comment on how those developments are run or the charges that are applied by FirstPort to the residents.

‘Since 2010, we operate and are the managing agent and landlord on all retirement developments built since then. 

‘We are committed to managing these developments for the long term and are pleased they see a positive average increase in price on resale.’

FirstPort says: ‘Our retirement customers tell us that the quality of life and the sense of community and companionship that comes from living in a managed retirement development has enhanced their lives greatly. 

The service charge covers the day-to-day running costs of a development, and we clearly explain our charges to customers and share budgets with them before the final bill is agreed so that there are no surprise costs.

‘If owners are struggling to pay the service charges for an empty property, we can of course work with them to put a payment plan in place until the property is sold or reoccupied.’

Campaign win 

It isn’t all bad news for people considering buying a retirement home. The Mail led a campaign this year calling on the Government to end toxic leasehold models used by developers.

As a result, the Leasehold Reform (Ground Rents) Bill is shortly expected to be passed, and that will ban the imposition of ground rents on new-build properties, including retirement homes.

The sector is keen to improve an image tarnished by the housebuilder model. Members of ARCO (Associated Retirement Community Operators) have set up a code of conduct that requires them to be 100 per cent transparent about fees before buyers put pen to paper.

There are also independent not-for-profit organisations such as Retirement Security Ltd, which has 32 communities across the country. Set up by Bob Bessell, a former director of social services for Warwickshire County Council, these communities are run by residents who set their own service charges. Retirement Security has never charged ground rent.

Such positive stories are vital if confidence in the sector is to be reinforced — and it must be because over the next 20 years, the number of people aged over 65 in the UK is forecast to increase by more than 40 per cent, to 18 million.

At the moment, there are 15 million unused bedrooms in the homes of older people, which could be freed up for younger families by downsizing. But before they do that, they will want to be sure that their investment — and their children’s inheritance — is safe.

moneymail@dailymail.co.uk

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Bournemouth is the most popular coastal town for buyers, says Rightmove

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The most popular seaside location for house hunters this year has been Bournemouth, new research has revealed.   

Rightmove identified the top ten most in-demand coastal areas in Britain, based on the highest number of buyer enquiries via its website.

The Dorset resort is the most popular, followed by Southampton, Hampshire and Brighton, East Sussex, with the South coast dominating the list. 

Rightmove has identified the top ten most in-demand coastal areas in Britain

Rightmove has identified the top ten most in-demand coastal areas in Britain

The top ten list also includes Blackpool, Lancashire – a coastal resort known for its amusement arcades and donkey rides – where prices have increased 8 per cent in the past year to £137,301.

It compares to the average house price in the top 10 locations, which rose 6 per cent this year. 

It is just ahead of the national average rise of 5 per cent, from £318,188, to £333,037. These figures are based on an average between January and November 2020 compared to January-November 2021. 

At the same time, Rightmove provided a list of coastal locations that have seen the biggest increases in house prices this year.

Padstow in Cornwall topped that list of coastal hotspots, with prices rising 20 per cent this year, from from £548,382, to £658,588.

The most popular seaside location for house hunters is Bournemouth (pictured), according to Rightmove

The most popular seaside location for house hunters is Bournemouth (pictured), according to Rightmove

AVERAGE ASKING PRICES IN COASTAL HOTSPOTS 2021
Rank Location Average asking price 2021 Average asking price 2020 Average asking price increase 2021 vs 2020
1 Padstow, Cornwall £658,588 £548,382 20%
2 Whitby, North Yorkshire £254,218 £217,620 17%
3 St. Ives, Cornwall £473,161 £411,484 15%
4 Porthcawl, South Glamorgan, Bridgend (County of) £307,051 £270,505 14%
5 Mablethorpe, Lincolnshire £173,612 £153,140 13%
6 Newquay, Cornwall £317,846 £281,204 13%
7 Filey, North Yorkshire £214,617 £189,914 13%
8 Pwllheli, Gwynedd £222,607 £197,213 13%
9 Brixham, Devon £299,127 £266,604 12%
10 Preston, Paignton, Devon £303,684 £272,029 12%
Source: Rightmove       

It was followed by Whitby, in North Yorkshire, which came second, with prices rising 17 per cent from £217,620, to £254,218. 

Cornwall’s St. Ives is in third place, with average values rising 15 per cent from £411,484 to £473,161.

A house with a good sea view and location will cost you, as it will probably be worth at least 40 per cent more than the equivalent inland, if not more.

Robin Gould – Prime Purchase 

Robin Gould, director of buying agency Prime Purchase, says: ‘Many people love the idea of living beside the sea, even more so since the pandemic struck and we have all been spending more time outside. 

‘However, a house with a good sea view and location will cost you, as it will probably be worth at least 40 per cent more than the equivalent inland, if not more. 

‘A frontline house is arguably worth 30 per cent more than one immediately behind it.

‘I recently bought a “frontline” house near Polzeath in north Cornwall for a client, which was right on the cliff top with stunning coastal and sea views.  

‘Although the house itself was very “vanilla”, most people would have forgiven it anything to have that ever-changing, interesting view.’

Also among the most popular coastal locations for homebuyers is Brighton (pictured)

Also among the most popular coastal locations for homebuyers is Brighton (pictured)

QUICKEST COASTAL MARKETS TO FIND A BUYER
Rank Location Average asking price 2021 Average time to find a buyer 2021 (days) Change in time to find a buyer 2021 vs 2020 (days)
1 Saltcoats, Ayrshire £111,419 19 -35
2 Troon, Ayrshire £178,666 22 -8
3 Westward Ho, Bideford, Devon £297,138 24 -46
4 Ayr, Ayrshire £161,301 25 -15
5 Kessingland, Lowestoft, Suffolk £219,538 25 -22
6 Littlehampton, West Sussex £364,180 26 -28
7 Goring-By-Sea, Worthing, West Sussex £396,078 26 -23
8 Marske-By-The-Sea, Redcar, Cleveland £181,882 28 -15
9 Canvey Island, Essex £308,261 28 -23
10 Weymouth, Dorset £283,585 29 -25
Source: Rightmove       

The red hot property market this year has translated into the time it takes to find a buyer hitting a record low number of days.

The average time find a buyer across the whole of 2021 is 44 days, 15 days quicker than the average in 2020.

Saltcoats in Ayrshire is this year’s quickest coastal location to find a buyer, at 19 days on average.

Troon in Ayrshire came second at 22 days, and Westward Ho, in Bideford, Devon was third at 24 days.

Calshot beach was included as Southampton, which features in the top ten most in-demand coastal areas in Britain

Calshot beach was included as Southampton, which features in the top ten most in-demand coastal areas in Britain

THE INCREASE IN COASTAL SEARCHES IN 2021
Rank Location Average asking price Increase in searches 2021 vs 2020
1 Morecambe, Lancashire £164,424 32%
2 Blackpool, Lancashire £137,301 21%
3 Great Yarmouth, Norfolk £194,066 15%
4 Swansea, Wales £180,603 15%
5 Saltburn-By-The-Sea, Cleveland £227,611 15%
6 Southampton, Hampshire £249,053 14%
7 Llandudno, Conwy (County of) £235,316 13%
8 Saundersfoot, Pembrokeshire, South West Wales £319,587 12%
9 Southport, Merseyside £215,838 12%
10 Scarborough, North Yorkshire £191,879 12%
Source: Rightmove     

Meanwhile, Morecambe, Lancashire saw the biggest jump in coastal buyer searches compared to last year, up 32 per cent, followed by Blackpool, up 21 per cent, and Great Yarmouth, up 15 per cent.

Tim Bannister, of Rightmove, said: ‘After a year where coastal locations really captured the imagination of British buyers, it’s interesting to reflect on how the overall picture looks at the end of the year.

‘In terms of average asking price growth, homeowners in Cornwall and Devon are the real winners this year, with properties in some areas outpacing the national average, though this does mean that it is increasingly difficult for some locals to get onto the ladder.

‘The speed of this year’s market really is astounding, seen in the time to find a buyer in some areas, particularly in Scotland.

‘Overall, this has been the year that either through changed lifestyle priorities, or the ability to work remotely, living in coastal areas has become possible for more buyers, which is reflected in the data we’re seeing in this study.’

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UK to require all incoming international travellers to take Covid-19 test

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All international travellers arriving into the UK will be required to take a pre-departure Covid-19 test – while Nigeria is being added to the British government’s travel red list, British health secretary Sajid Javid has said.

Mr Javid said the government had decided to move after receiving new data about the spread of the Omicron Covid-19 variant, which emerged in southern Africa.

“Since we have learned of this new variant our strategy has been to buy time. We have always said we will act swiftly should new data require it,” he told broadcasters on Saturday.

“Over recent days we have learned of a significant number of growing cases linked to travel with Nigeria.

“There are 27 cases already in England and that’s growing. Nigeria now is second only to South Africa in terms of linked cases to Omicron.”

Mr Javid said that the number of cases of Omicron in Britain had now risen to about 160.

Under the new rules, from 4am on Monday only British and Irish nationals travelling from Nigeria will be allowed into the UK and they must isolate in a government-managed quarantine hotel on arrival.

And from 4am on Tuesday, anyone travelling to the UK from countries not on the red list will be required to take a pre-departure Covid-19 test a maximum of 48 hours before leaving, regardless of their vaccination status. – PA/Reuters

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Would you pick a home on the Isle of Wight or one on the Isle of Skye?

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Which island home would you pick: A townhouse on the Isle of Wight or a converted church on the Isle Of Skye?

  • We take a look at two island properties and ask which one do you prefer?
  • One property is on the Isle of Skye and the other house is on the Isle of Wight 










Ever fancied escaping the rat race and living on an island? While travelling to the Caribbean may still be the dream, something closer to home may be a more realistic ambition.

We take a look at two different properties for sale on islands off the mainland of Britain.

Each property is on the market for the same price, but one is found in a more northern location on the Isle of Skye, while the other is found in a more southern destination on the Isle of Wight.

Which island home would you pick? A townhouse on the Isle of Wight or a converted church on the Isle Of Skye?

Which island home would you pick? A townhouse on the Isle of Wight or a converted church on the Isle Of Skye?

Which of the two homes for sale, listed on property website Zoopla, would you choose? 

That is the question we are asking in our latest property battle series.

1. Six-bed house, Isle of Wight, £310k

The first property featured in our latest property battle series is on the Isle of Wight, off the south coast of England.

The Isle of Wight is known for its beaches and seafront promenades, including Shanklin beach and Ventnor beach, which is dotted with vintage beach huts.

On the island’s western point, there are three white chalk rocks called The Needles, which are guarded by a lighthouse.

This Grade II listed house on the Isle of Wight is being sold by estate agents Watson Bull & Porter

This Grade II listed house on the Isle of Wight is being sold by estate agents Watson Bull & Porter

The six-bedroom townhouse is in the county town of Newport, slightly north of the centre of the island

The six-bedroom townhouse is in the county town of Newport, slightly north of the centre of the island

The island currently has a Grade II listed house for sale, which is currently on the market for £310,000 via estate agents Watson Bull & Porter.

The terrace property has six bedrooms and is in the county town of Newport, slightly north of the centre of the island.

Dan Copley, of Zoopla, said: ‘Ripe for renovation, this period home located in a prime location in the heart of Newport has all the makings of a beautiful family home. 

‘With its generously proportioned interiors, it could easily be reconfigured to create large, bright rooms, that work for modern living.’

2. Five-bed house, Isle of Skye, £310k

At the other end of the mainland – off the west coast of Scotland – is a property for sale in Dunhallin, on the Isle of Skye.

The property was designed in 1829 by the architect Thomas Telford and was previously the Waternish Parish church.

The property has been divided into two properties, while retaining many original features such as the inner porch doors. It could be used as a holiday let or transformed into one large family home.

This five-bedroom property on the Isle of Skye is being sold via estate agents The Skye Property Centre

This five-bedroom property on the Isle of Skye is being sold via estate agents The Skye Property Centre

The property was designed in 1829 by the architect Thomas Telford and was previously the Waternish Parish church

The property was designed in 1829 by the architect Thomas Telford and was previously the Waternish Parish church

There are a total of five bedrooms at the property, which is on the market for £310,000 via estate agents The Skye Property Centre. 

Dunhallin is a scattered crofting community lying midway along the Waternish Peninsula.

The community is served by a number of mobile facilities, including mobile banks and library service. Portree, the capital of the island, is 24 miles away.

Mr Copley added: ‘Homes on the Isle of Skye don’t get much more charming than this. 

‘A former parish church designed by renowned architect Thomas Telford, it’s today divided into two properties, but could easily be combined to create one large generous home. 

‘With a host of period features and ecclesiastical windows, it has the makings of a grand design.’ 

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