Rising demand for places accelerates investment in care homes
LaingBuisson has launched the first edition of its Care Home Construction: 2017-2021 UK Market Report to coincide with its annual flagship Social Care Conference which is held today in London.
The report shows that there are currently nearly 19,000 care homes, nursing homes and residential homes providing adult and elderly care in the UK, and that total revenues for the sector amount to £15.9 billion (up 5% on 2015).
An ageing population and rising levels of disability and dependency among older people has driven increased demand for care homes. At the same time, the growth in domiciliary care and stricter entry criteria by local authorities has choked some of this demand, especially in the public sector.
These dynamics have had a distinct influence on this sector, where recent years have seen a net reduction in beds available as closures outpace the registration of new homes. Low local authority fee rates have led developers to place almost all new, state-of-the-art homes in affluent areas of the country where they can count on private payers. And despite the levels of investment seen in the past 20 years, a lot of existing care home stock remains sub-standard. Where margins are low, there is an increasing reliance on bank support, underlining the wider vulnerability felt by this market.
Nevertheless, the report finds that the care home sector is expected to outperform the wider healthcare market owing to the undersupply of appropriate accommodation and the increasing demands of an ageing population. Even in the five years between 2016/17 and 2020/21 it is expected that 36,000 new places will be needed, and these will come mainly from the private sector. Indeed, the market appears attractive to overseas investors, and between 2016 and 2018 they have been involved in around 80% of all care home property deals. At the same time, the sector is competing with housing, hotels and student accommodation for space for development.
William Laing, founder of LaingBuisson said:
“With the UK population over the age of 65 expected to rise from 10.6 million in 2010 to 16.1 million in 2035, there is clear demand for care homes into the future. Even considering that the increase of domiciliary care enables people to remain at home longer, which also fits with local authorities’ requirement to reduce admissions, the sector also plays a crucial role in keeping people out of NHS hospital beds (particularly in geriatric and mental health care), especially where people have disabilities and higher levels of dependency. It is not surprising that the market is, therefore, attractive to investors.
“Nevertheless, we need to consider what steps can be taken, in terms of planning procedures and financial support, to ensure a spread of high-standard care home provision across the country, not only in its more affluent areas.”
Find out more about the Care Home Construction report here