In recent times, more and more people are considering care home investments as an alternative investment strategy for a variety of reasons.
In today’s article, I’m going to outline these and show why it’s fast becoming a suitable UK property investment for so many people.
Ageing UK population
Despite the fact care homes have been existent in the UK for many years now, care home investment is currently very much a growing trend since changing demographics over the last thirty years or so have led to a substantial increase in the percentage of the UK population, which is aged 65 and over.
At present this is almost a fifth of the total population and it is predicted to increase to around a quarter over the course of the next thirty years. We’re constantly told that the UK has an ageing population and it’s certainly true amongst a large percentage of the total demographic. In the simplest of terms, the laws of supply and demand very much favour this market sector.
The figures show that there are more and more older people seeking these care homes and with a relative shortage in terms of supply on these, prices are going up on the care home investment sector.
Strain on public funded care
English councils are facing growing numbers of elderly and disabled people who require care, whilst facing a lack of funding to pay social care fees. To meet the growing need all but four councils in England are planning to increase council tax by the maximum allowed to help pay for social care.
The implementation of the National Living Wage6 in 2016, coupled with financial pressures on local authorities has put added strain on the care industry. Rises in providers’ costs and the squeeze on local councils’ budgets are leaving some care providers in an unsustainable position.
The combination of both privately and publicly-owned care home closures, and increasing numbers of people requiring social care, means there are big opportunities for well-run providers of care to expand the development and refurbishment of a care home investment in areas of high demand.
Other types of commercial property such as retail or office space can be affected by the same sorts of issues as faced by residential landlords. These include vacant periods, unrecoverable rent and changes in circumstances which negatively affect the property, such as changes to the employment landscape or to transport links.
The nature of care homes is such that these issues are generally of little to no concern. The simple fact of the matter is that the ageing population of the UK has been growing older for three decades now and is set to keep on growing older for at least the next three decades. Older people require homes which are suitable for their needs in the later stages of their life and care homes provide an effective way of catering for the ageing population.
Highly regulated industry
Due to the highly sensitive and important nature of care, the care home investment sector is a highly-regulated industry. The Care Quality Commission (CQC) are the independent regulator responsible for monitoring, inspecting and regulating health and social care services in England.
Because of the CQC’s regular inspections, most care homes are kept to the highest standard in terms of living space and building quality, meaning that any investor buying a room in these can expect very little to go wrong from their perspective. It’s a completely hands-off investment sector that is left in the hands of the professionals both on-site and from the regulators.
With the tried and tested sales model, finding an ethical, sustainable investment that delivers stable returns and prospects for capital appreciation is no longer the preserve of large institutional investment, and is increasingly becoming an attractive option for individual investors thanks to the security of long leasebacks and long-term cash flows.
For the private investor, now is an excellent time to consider investing in a care home investment. There are a growing number of innovative developers offering great UK property investments of this nature.
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