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Care Homes Investment – A Stand Out Asset Class

Part 2 of the Care Homes Article Series. Read Part 1: The Ageing Population in UK here.

The UK care homes market faces an imminent crisis due to a national shortage, creating increasing opportunities for investors and generating a truly global appetite for the sector. The sector has been named the stand out asset class of the year by Knight Frank.

Statistics show that old age is closely linked to debilitating illnesses such as dementia and Alzheimer’s Disease, causing an increase in the need for care homes and assisted living. The UK has a growing ageing population, with new  research by the ONS revealing that 1 in 4 people will be aged 65 years old in less than 30 years.

Of this population, there are approximately  850,000 people with dementia. With better diagnosis and rising life expectancy rates, numbers could exceed 1 million by 2025 and reach 2 million by 2051, when 1 in 3 people over 65 years will have the disease. Today, dementia is the leading cause of death in England and Wales, replacing heart disease.

What is now a grave concern is the inadequate supply of proper care homes and facilities to cater to the increasing number of aged citizens, particularly those afflicted with dementia.

National Crisis: Critical Shortage of Care Homes

Currently, only about 416,000 people live in care homes (Laing and Buisson Survey 2016) in the UK. This constitutes only a meagre 4% of the population aged 65 years and over, and 16% of those aged 85 and above.

Clearly, the UK care homes sector is facing a national crisis — an issue that Knight Frank’s UK Healthcare Development Opportunities 2017 report attributes to a nett loss in homes and beds. This is a trend that is likely to continue for awhile. 

A survey of UK local authorities by the Family and Childcare Trust confirms this:  4 in 5 UK local authorities have insufficient care for older people, particularly those with dementia. And only ⅓ of councils had enough nursing homes with specialist dementia support.

Research by charity outfit, Independent Age revealed that overall, a quarter of homes were rated as either inadequate or requiring improvement in January this year with the worst region being the Northwest (this includes Stockport, Salford and Manchester). Which is why there is an increasing need for properly built, fully-functional care homes that cater to the varied needs of the aged and infirm. 

Research by charity outfit, Independent Age revealed that overall, a quarter of homes were rated as either inadequate or requiring improvement in January this year with the worst region being the Northwest (this includes Stockport, Salford and Manchester). Which is why there is an increasing need for properly built, fully-functional care homes. Image credit: http://bit.ly/2ouQfOj

The Economist published an article revealing fundamental and systemic flaws, explaining that the care home market has not responded to demand, and, even when built, are often not located in the right places.

‘It is hard to get an old-people’s home built. Local authorities are not always willing to grant planning permission, especially when a plot could be used more lucratively, such as for shops,’ the article states.

The fact is, dedicated care is very costly. And, understandably, social care provided by councils is quite tightly rationed, as local authorities can only provide help to those with very high needs. Currently, only those with low means — under £23,250 in savings and, in some cases, the value of a home — get help towards their costs. The rest have to pay all their care costs, which could exceed £100,000. 

Julian Evans, Knight Frank’s Head of Healthcare said that the UK care homes market faces an imminent crisis due to a national shortage of beds. However, this crisis and acute undersupply of care homes has created opportunities for investors, and will continue to drive investor appetite in the coming years.

“The disparity of care bed supply and demand presents increasing opportunities for investors, and, combined with the fall in the sterling, has generated a truly global appetite for the sector.

“The care home sector is likely to be the stand out asset class of 2017, particularly for those investors wishing to diversify their asset portfolios in the current uncertain economic climate,” he explained.

Stand-Out Commercial Property Class

Just like residential property and student property in the UK, the law of economics applies to UK care homes investment — with low supply and high demand, as well as the average cost of ₤574 per week at a care home facility, returns are pretty impressive. 

Some projects offer up to 8% nett yield (after all expenses) for up to 25 years, as well as an exit clause. For many investors, the exit clause is part of the investment attraction.

Some of the care homes investment projects in our portfolio offers an exit/guaranteed buyback at years 10, 15, 20 and 25.

“Indeed, retirement living has fundamentals for growth, and makes a great investment opportunity. With the ageing population thrown in to the equation, care homes investment could be the next student investment,” said CSI Prop spokesperson Virata Thaivasigamony.

A care home project that has drawn great response from investors is Clarence Grove. This 91-bed facility offers much-needed, top-notch dementia and palliative care in the densely populated Greater Manchester area.

It is a fully-managed, income-generating asset that delivers respectable returns and a direct, positive impact on the lives of those in need of quality, affordable care. The home is surrounded by beautifully landscaped gardens, with seating areas, raised flowerbeds and a tranquil sensory area. There is also ample parking on the grounds.

Commercial property care homes investment: this is selling out fast. 5 units left.
Commercial property care homes investment: this is selling out fast. 5 units left.

This project is almost sold out, with only 5 units left. Here are some highlights of the investment:

  • Completed & fully operational
  • Priced from £75,000
  • 8% rental yield
  • Assured 25 years
  • Guaranteed buyback/exit at year 10, 15, 20 and 25
  • ZERO stamp duties
  • ZERO legal fees (terms apply)

If you want further information about this project or any other care homes projects for investment, contact us at 016-228 8691 or 016-228 9150.

By Vivienne Pal

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260

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