A golden retirement

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Perfectly manicured gardens, therapeutic pools, restaurants and state-of-the-art gymnasiums. It sounds like a five-star hotel, except this place is staffed by a 24-hour medical team and inhabited by retirees. It is, in fact, a typical description of one of Barcelona’s burgeoning luxury residential care or ‘Senior Resort’ homes—a €2.4 billion industry that has become one of Spain’s fastest growing business sectors since the turn of the new millennium.

An increasing number of Spain’s 7.5 million over-65 year olds are flocking to such homes, which allow them to see out their days in luxury with the security that staff are always on hand to help. Demand looks unlikely to diminish—the government forecasts that by 2020, one in every four Spaniards will be over 65, making it one of the oldest populations in the world along with Japan and Italy.

Such a retirement doesn’t come cheap, however. A room in one of these homes can cost anything up to €3,500 a month, whilst the basic state pension in Spain stands at just over €700 per month. Nevertheless, construction is increasing at an explosive rate, as much-anticipated laws are expected to subsidise the industry whilst banks start to allow pensioners to use their property equity to pay for it all. “There isn’t a month that goes by without two or three new residences opening,” according to Rafael Navas of the construction firm Grupo Jubilo. “We’ve already got about 700 in construction nationwide at the moment.”

One example in Barcelona is the exclusive Euroresidencias chain of homes in Les Corts and Sagrada Familia. For double and single rooms ranging from €1,720 to €3,555 a month (excluding tax), residents enjoy an array of specialised facilities including a specially equipped gymnasium, resident psychologists, hairdressers and chiropodists, electronically controlled beds, laundry service, tailored food menus and 24-hour medical assistance. “We’ve only been open a month but places are being filled rapidly,” said director Francesc Lorente. “We’ve got around 50 rooms here with residents mainly aged 75 years and upwards, although hardly any foreigners as yet.”

Why is this boom happening now? Spain’s rapidly ageing population has stimulated the emergence of two key factors. One is the much talked about Ley de Dependencia—a bill that came into effect this year and pledges to subsidise serious dependants—those needing full-time assistance. However, the law will only benefit a relatively small percentage of Spain’s elderly. “Around 200,000 people will be able to apply, which is only around 15 percent of Spain’s 1.3 million dependants,” said Lorente. “Beneficiaries will receive around a 35 percent subsidy of their annual care bill. However, if the family can pay at least 90 percent of the costs, they will be ineligible. In theory, they could be subsidised to stay in one of high-end residences although this is unlikely.”

The other important factor has been the introduction of ‘Hipoteca Inversas’ or ‘Renta Vitalicas’, which allow pensioners to use the equity in their property to pay for the high costs of such homes. In the case of Hipotecas Inversos, banks such as Ibercaja, La Caixa and Caixa Terrassa are lending pensioners up to 80 percent of the value of their property. With Rentas Vitalicas, the bank ‘acquires’ the property from the pensioner with an agreement to pay the residential care bills until the person dies, which can be advantageous if the value of the property is particularly low. Many other banks are set to follow in what looks likely to become a standard banking practice.

Controversy surrounds the morality of pensioners exchanging their hard-earned property for their retirements, but public options are becoming increasingly limited. The government estimates that Spain only has an average of 2.5 nursing home places per 100 for over-65 year olds, which is half the minimum amount recommended by the Organisation for Economic Cooperation and Development. Spain has always relied on the fact that the vast majority of pensioners are cared for by relatives, but this number is slowly declining as offspring face their own economic pressures and become increasingly mobile.

Elders who cannot afford private care are offered a place in a publicly financed facility to which they have to contribute around 80 percent of their retirement pensions. If an elderly person has neither personal savings nor a pension, the state will look for a free place for them, but the person usually has to join a long waiting list. The fact that banks are increasingly prepared to use the equity in pensioners’ property to fund their retirement, however, could obviously change this situation significantly. One consequence of this move towards mortgaged retirements could be the death of smaller, traditional residential homes as mega-conglomerates seek residential projects with the highest financial returns. “The sector is very fragmented at the moment,” according to Antonio Vintanel of Residential Caser. “In the near future, there will be many construction group mergers and the entrance of foreign multinationals into the market.”

So far, Mapfre and Caixa Madrid have already joined forces in this area, as have Gerogestión and Amma. BUPA (Sanitas) are one of the first foreign companies to have already jumped on the bandwagon and it is thought it will be followed by giants such as Ascott Group which has 16,000 luxury residential complexes worldwide.

However, despite the huge amount of expectation and investment in luxury complexes, the industry might not sustain itself quite as long as investors are hoping. A study by the ‘Edad y Viva’ Foundation found that Spanish pensioners are a stubborn old lot when it comes to leaving their homes. In Catalunya, for example, only 12 percent of those over 55 wanted to move into a residence of any kind—only in Castilla y Leon (seven percent) are old people less enthusiastic about the prospect. This is in comparison with places such as Extremadura (30 percent) and Madrid (25 percent) where senior citizens were considerably keener on the concept. Most significantly however, around 80 percent of all those surveyed said that given the option, they would prefer home-help over moving into a residential home.

“The simple reason for this is not many people can afford to pay €1,400 a month in a residence,” according to Josep de Martí president of Inforesidencias.com.

“Social practices and cultural attitudes in Spain also continue to have a strong influence,” according to Scott Eckstein of Senior Living International. “Compared to the USA, the centralised nature of the city is felt to be accommodating enough for seniors in Spain who have always fended for themselves within their little neighbourhood,” said Eckstein. “In addition, as in most of Europe, Spanish citizens have a strong sense of entitlement. The government has always provided health care and supported retirees with pensions and housing. Private solutions that place more of the burden of long-term care in the hands of the seniors and their families would be a radical, but ultimately crucial change to the economy of Spain.”

Whether this diplomatically put “sense of entitlement” will stand up to the might of the market remains to be seen.