Faced with rising mortgage rates that are crippling the housing market, combined with soaring inflation that is eroding household savings, life annuity sales are booming. As a Toulouse agency specializing in this sector explains to us, a win/win formula for sellers and buyers.
For some, a bet on death or for others, on the contrary, real opportunities, the sale of life annuities with a bad reputation. But in the face of rising mortgage rates crippling the brick-and-mortar market, combined with soaring inflation eroding household savings, annuity sales are making a comeback.
It has to be said that by giving the buyer the ability to smooth out the price of the property while allowing the senior seller to increase their pension, this solution has everything to please. The market where Office du vieger, the Toulouse network created by Jérémy Dols with around thirty independent agents in France, took off.
“There is clearly a boom in life annuities. On the seller’s side, we are seeing many retirees find themselves in a critical situation due to inflation. They can no longer maintain their homes and do not have the resources to use domestic help. For buyers, access to credit has never been better complicated. And life annuity is a good compromise. Today it represents almost 3% of transactions compared to 1% a few years ago and we should soon reach 5%, analyzes Marine Livoti, director of the “Office du life anger”.
More than 600 euros per month
Françoise M., 70 years old, was seduced by this concept. As an annuity for life, the septuagenarian therefore decided to sell her house in the town of Pergain-Taillac in the Gers. “I have a very small pension and my partner is 80 years old. I thought that if one of us ever found ourselves alone, it might be a bit tight financially and I don’t want to be a ‘burden on me’ children,” explains Françoise.
Thanks to a monthly pension of 610 euros, spouses can enjoy their senior years more peacefully. “The amount will be evaluated monthly based on the consumer index. But because the buyer was afraid that he would leave, we agreed that the rent would not exceed 700 euros per month,” continues Gersoise.
The seller also undertook to limit this annuity in time, to a maximum of 20 years. A way to appease buyers who might have been upset by the story of the super centenarian Jeanne Calment. She sold her apartment as an annuity for life in 1965 and received a monthly annuity for more than thirty years… Moreover, the Arlesian notary who acquired Jeanne Calment’s apartment died much earlier.
“Good Compromise”
If Françoise decided to move out of her house, the others continue to live there after the sale. A condition that didn’t bother Marion O. and her partner when looking for a rental investment.
The couple recently bought a busy apartment in Colomiers, near Toulouse. “A life annuity seemed like a good compromise for us as it allowed us to invest without calling the banks while avoiding rent restrictions,” says Marion. In addition to avoiding finding a tenant and having to endure turnover and non-payment of bills, the resident, namely the seller, continues to maintain her accommodation. “Only positive things!”
50,000 euros for T3
Another difference with François, the seller does not receive an annuity, but the entire amount at once. This is called a bouquet. “Our life annuity is a 100% bouquet. This means we just paid an amount when we bought it that corresponds to the amount deducted from the price of the property. That means almost €50,000 for a T3 in Colomiers.” , she counts.
On the other hand, buyers will only be able to recover the fruits of their investment after the seller’s death or relocation. As for those who might accuse her of a lack of ethics, Marion defends herself: “We don’t see it as a bet on the seller’s life at all. It’s true that we’re buying a property at a discount and that “In the end we’ll have an apartment that’s worth the full price. But it’s a win/win solution because we’re helping him stay in his home while still benefiting from the money he needed.” The way the seller “inherits” himself by turning his real estate equity into instant cash.
With around 5,500 sales each year, life annuities currently represent only a small proportion of real estate transactions. But in the face of an aging population and ever-lower pensions, the formula tends to be more popular.
How does it work ?
There are two main types of life annuity: vacant or occupied. “The most famous remains the occupied life annuity, when the owner sells his property in full ownership and continues to live at home. Either he receives the entire bouquet on the day of signing, or, and this is the main part of the cases, a lower bouquet and life annuities until his death. What as for the investor, he will use the discount as compensation during the purchase, which can reach up to 50%”, summarizes Marine Livoti, director of the agency.
The transaction is far from settled, but it can be tailored to the needs, so it is of interest to surround yourself with a professional before you start. “Both parties can also agree on a pre-sale. In this case, we define the dates in advance, always with a date lower than the life expectancy of the senior citizen,” the director explains.
On the other hand, if the life annuity is free, the buyer can live in the property from the beginning or rent it out, “but there will be no discount for the investor who chose this option”, reminds Marine Livoti. And there is no age limit set by law to sell your property in a life annuity.
“It’s a socially responsible investment. Seniors take it as life support, so that they can live better and enjoy their last days,” concludes the director.