Care homes defy Brexit gloom

brexit

The care home sector has defied Brexit uncertainty with profitability rising this year according to estate agents Knight Frank.

Knight Frank’s 2016 Care Homes Trading Performance Review shows profitability in the sector up to 27.5% in the 2015/2016 financial year from 27.1% in 2014/2015, with average weekly fees rising by 2.7% to £694.

Julian Evans, head of healthcare, Knight Frank, commented: “In the face of emerging challenges such as the EU Referendum outcome and the increase in the National Living Wage, the care home sector remains a highly attractive investment for UK and overseas investors.

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“The fall in sterling, combined with the fundamental strength of the occupational market makes the care home sector appealing to those investors wishing to diversify their asset portfolios.”

Driven by increased life expectancy, care home occupancy rates rose for the fifth consecutive year to 88.4%, the highest rate since 2008.

The UN forecasts that the population of over 80s will reach 5 million by 2035.

Demand is, meanwhile, continuing to outstrip supply as more care homes are forced to close because of rising costs such as the National Living Wage.

Staff costs rose by 3.2% in 2015/2016, or 58.2% of income, with the trend expected to continue over the next 12 months.

Knight Frank said care homes would remain an attractive asset class for investors despite rising costs due to their defensive characteristics amidst Brexit uncertainty.

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