Here at Tarquin Jones, we don’t limit ourselves to purely residential Buy to Let investment opportunities. We take a look at various property sectors that fundamentally serve as sound investments for our clients.
In today’s article, we will be going into the reasons why care home investment opportunities are proving a shrewd asset class for many Buy to Let property investors.
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 those that are available.
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 care facilities in areas of high demand.
In some ways better than residential or commercial?
Investing in care homes offers the best advantages of commercial property investment and residential property investment, while minimising the potential downsides of both.
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 UK population 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 this significant demand.
Increased bank lending for the sector
Care home investments have seen a massive influx of investment support from a variety of lending institutions over recent years, and therefore are becoming an integral part of any investment portfolio. Banks and other lending institutions are becoming very eager to lend for UK care and nursing home investments, due to the long-term, robust and lower risk income streams that it offers.
They’re a far cry away from flipped residential property or student accommodation in terms of potential lending- care home opportunities are safe and assured to earn you a steady income. Banks and other lenders love this in a property and will more likely offer good financing as a result.
Highly regulated industry
Due to the highly sensitive and important nature of care, the health and social care 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.
For the private investor, now is an excellent time to consider investing in UK care. There are a growing number of innovative developers offering great buy to-let investment opportunities within the UK care sector.
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.
Care home opportunities provide the investor with the chance to invest in one of the UK’s most unique asset classes to obtain a regular rental income. Capital growth is not something which is typically expected of care home opportunities but with some of the unique deals that Tarquin Jones manages to source i.e. St. Camillus in Blackpool, buyback options provide that aspect of the investment as well as a solid income stream.