Many retirees are no longer able to financially maintain their homes. To avoid having to part with their property, they are increasingly opting for life annuity. A dedicated investment fund has just been created.
Renée Perrin has lived in her house in Champagne (VD) for 23 years. At 83, childless, her financial situation became complicated following the death of her husband. Last year, this ex-restaurateur decided to sell her house for life.
“There was no longer my husband’s AVS. And as self-employed, we had no second pillar. I found that the life annuity solution was the best for me. It allows me to stay until I died. Thanks to that, I didn’t have to uproot myself”.
A sale at a discount, which is worth it
The principle is simple: the owner sells his home at a price significantly lower than the market price. In exchange, he will be able to continue to live there until his death.
In the case of Renée Perrin, her house, valued at 940,000 francs, was sold for 640,000 francs. A devaluation that she considers normal, since she will be able to live there until her last days. “Finally, it’s as if I paid rent for 10 years to my landlord. And then I’m at least at home, in my memories,” notes the octogenarian.
This retiree’s relief goes beyond the money she receives. Because Renée Perrin no longer has to worry regarding maintenance: “Everything that concerns the house no longer concerns me. If the heating fails, if my stove fails, it is at the expense of the new owner. I no longer pay property tax, no more building insurance, no more fire insurance.”
Growing niche market
Renée Perrin is no exception in Switzerland. The wave of baby boomers that is sweeping the AVS is pushing more and more owners to sell life annuities. The decline in their income coupled with inflation and rising energy costs is supporting this new boom.
Real estate agent Christophe Andrié bears witness to this. He specialized 7 years ago in the sale and purchase of life annuities. Today, he carries out 3 to 4 transactions per month in French-speaking Switzerland.
“The market is growing because people find themselves in retirement, with increasing charges. Health insurance is increasing and so are interest rates. On the other hand, pensions are not moving,” explains the broker at Viagers.ch.
A first dedicated fund
This growing niche market has even prompted the creation of a dedicated real estate fund, Viage SA, authorized by Finma last month. The owners will be able to sell their property directly to him.
François Normand, Managing Director of Viage SA, explains the approach, which benefits both sellers and buyers: “Banks today may not renew your credit if retirement income is not sufficient. The Viager real estate fund is a solution in these cases so that the elderly can enjoy their home until the end of their lives.”
On the investor side, the main interest of institutional buyers, according to François Normand, is “to be able to invest the money in a societal product, which provides a solution for the elderly. Then, it is a niche market, which did not exist before, namely a collective real estate market of individual houses. Finally, it is a market that has no vacancies, since all the people live in their house”.
In capital or in annuity
The amount is generally paid in two instalments. First, an initial amount, called the bouquet, to which is added a monthly annuity, which the seller receives until his death. The distribution between the bouquet and the annuity is generally discussed between the parties.
“At my age, I chose capital [Le bouquet, ndlr]. Because at 83, I will not receive a pension for a long time”, thinks Renée Perrin.
The Viage SA fund has set the minimum entry age at 70 years. Knowing that regarding 40% of baby boomers are owners, the potential market is huge.
TV Subject: Philippe Lugassy
Web design: Feriel Mestiri
