uk care home

The UK care home industry is facing an overwhelming demand as the ageing demographics multiply. In a report by Knight Frank, the first half of 2018 lost 6,028 beds following six consecutive years of growth and occupancy levels in care home facilities rising to as much as 89.4%. 

Knight Frank head of Healthcare Julian Evans said that the UK market must go into more developments of new facilities to address the growing need for care homes. If not, a likely crisis is going to exist in the next few years. He also stressed that investors are willing, but developers must deliver. 

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Foreigners Showing Interest in the UK Healthcare Market

A dependable source of encouragement for the UK care home industry comes from high overseas interest. Octopus Healthcare conducted a global institutional investment survey and found out that over 30% of global institutions will allocate their funds to healthcare infrastructures. This allocation will produce an increase of 10% in care home facilities. 

Knight Frank reports that this foreign investment will move forward from different regions to include APAC and North America as the pound continues to weaken. The main problem the care home market will face is the lack of investment opportunities for willing investors. 

Healthcare investors are also now looking at diversifying their interests to include senior living sectors, as this sector proves to be a significant alternative investment asset. 

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UK Care Home Investment Performance

Different healthcare property types have yields ranging from 4% to 6% depending on the level of acuity, tenant covenant, and patient profile. Prime care homes have lower yields amounting to only 3.75% in 2018. Adult care and supported living accommodations have 200-300 basis points, much higher than the prime care home stock. The reason for this higher basis point is the need for more specific care requirements for individuals with mental health disabilities. 

To date, the healthcare sector surpassed all UK property average and will continue to do so in the coming years. There is a growing demand for the UK care home property as the baby boom generation start to enter retirement age. The healthcare sector will remain to support a healthy outlook. In five years, the healthcare sector will have a total return of 8.3%. 

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Growing Senior Demographics Driving the UK Care Home Market

Private investors can create a high-yielding investment opportunity as demand for more care homes continues to rise. In the Office of National Statistics (ONS) prediction, as much as 20.7% of the UK population will be over 65 come 2027, a significant increase in 18.2% figures presented last 2017. Additionally, statistics also show that approximately 25% of individuals aged 90 and up and roughly 0.7% of those aged 60 and up will live in care homes. These numbers highlight the UK healthcare trend of care home sales leasebacks. Care home facilities needing capitalisation to address the growing demand are also increasing in number. This insufficiency of funds presents an excellent opportunity for investors who want to hold valuable real estate assets with inflation-linked reviews. 

The UK care home investments are growing at an unprecedented rate, and it will continue to do so in the next five years. It is up to the investors to look for the right UK care home investment to capitalise on. 

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