Here are week 43’s highlights in the UK economy.
Sunak takes office as the newest PM. Rishi Sunak vowed to fix his predecessor’s mistakes and unite the country amidst the current economic crisis. The former finance minister met King Charles II and was confirmed as the country’s youngest PM in history.
Foxtons raises full-year outlook. London estate agent Foxtons reported an +18% revenue uptick year over year in its lettings department, owing to the rise in average rental prices and more extended tenancies in the capital.
UK real wages drop at sharpest momentum. Real wages adjusted for inflation dove 2.6% in the year through April, according to the Office for National Statistics (ONS). This is the sharpest decline since a 3.3% drop during the 2010 financial crisis.
Big banks increase bad loan coverage. Some of the country’s largest lenders have set aside £1.5 billion to cover bad loans after announcing a lower outlook for the UK economy. The buffer will be used to write off nonperforming loans from their balance sheets.
London prime property prices still not in recovery mode. Property deals in London continue to fall through, according to LonRes. The data company reported 262 prime home sales fell apart, which they attribute to former chancellor Kwarteng’s mini-Budget speech, soaring mortgage costs and dire economic outlook.
London’s retirement luxury flats attract Goldman Sachs. The US bank will invest £3 billion in property firm Riverstone over the next five years to build apartments for wealthy pension holders who will be part of exclusive integrated retirement communities.
High-end retirement communities are booming in the country, thanks to wealthy baby-boomer pensioners who have become empty nesters or those with more disposable income that can cover the high cost of maintenance and service, ground rent and lease renewals in retirement villages. It’s no surprise then that Goldman Sachs and other investors are taking a shot at senior housing.
Profiting from the UK's aging population can be lucrative only if future demand can be supported by current demographics and earnings. The Office for National Statistics (ONS) estimated that those in the 50-to-59-year-old age bracket are earning a median annual gross pay of £29,007, which is just slightly below those in the 40-to-49 age group at £31,476. Those who are 60 years old and over, on the other hand, earn £22,023.
ONS also added in a separate report that pension holders will grow by +13.2% in mid-2030 and by +15.2% in 2045. It also forecasts that the much older population segment will rise by 2045 when Baby Boomers reach 80 years old by then.
But not everyone can afford affluence or even get to retire at this time. The ONS reported in September that the estimated number of employed people aged 65 years and over has set a new record at 173,000 during the second quarter of 2022. This growth is attributed to more seniors taking part-time positions and rendering work only for a few hours. Most of these workers are in the hospitality and arts, and entertainment and recreation industries.
Inflation, the high cost of living, uncertainty in financial markets, and a grim economic outlook all suggest why many seniors refuse to retire for now. McKinsey reported that 63% of Baby Boomers are concerned about rising prices. More so, consumer association company, Which?, revealed that 8.9% of households missed a mortgage, rent, bill or credit payment in the last month, while the number of households that have increased their borrowing, cut back on spending, or tapped their savings grew by +23%. Retirees today have a much weaker spending power compared to the years before the pandemic.
But for the affluent segment, there’s potential for higher profits in luxury retirement centres, especially when it comes to future demand. The Financial Conduct Authority (FCA) found out that although Baby Boomers have experienced a -23% reduction in their earnings because of the pandemic, they are less likely to suffer from financial challenges than other generations because they have accumulated more savings and are already earning higher. With these, we expect to see more retirement villages in the coming years.
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