The UK has seen a net loss of 189 elderly care homes during the 12 months to September 2015, according to a study of the sector by property consultant Knight Frank.
In its annual UK Healthcare Development Opportunities report, Knight Frank suggests that rising demand and falling supply makes it a sector ripe for investment. “The growing shortage of care homes in the UK presents opportunities for developers and investors,” it says.
If current trends continue, the existing bed supply of 456,400 is forecast to fall to 444,700 by 2020, while the population of over 65s will rise from 11.4 million to 12.4 million, resulting in an acute shortage of care beds by 2020, the study says.
The research also confirms the growing north-south divide that is affecting care home operators. Northern regions continue to have more beds per head of elderly population than in the south. The northeast currently has the highest level of supply with over 47 beds per 1000 of over 65s, compared with just 28 beds per 1000 in the Greater London area and around 40 beds per thousand in most other southern regions of England.
Operators are scrambling to more accurately match the supply of care beds to demand, which is leading to an exodus from the north and a boom in development in the south. Knight Frank measures registrations of new homes and de-registrations for those that are closed. New registrations are concentrated in the south and southeast, while de-registrations are predominately in the northwest.
There are exceptions to the national trend. Affluent Manchester, for example, is outperforming its surrounding area for registrations.
Knight Franck provides a handy hotspot league table that lists cities and counties that analyses the gap between supply of care beds and demand, along with the economic growth prospects of the area and the forecast growth in the 65+ population. The best areas are almost entirely in the south, with Greater London, South Glamorgan, Northamptonshire, Essex, Cornwall and Buckinghamshire occupying the top six spots.
The conclusion of the report comments on the broader economic situation, the impact of current government strategy, and how the care home industry is reacting: “The Chancellor’s Spending Review provided some positive news for the UK health sector. The Chancellor indicated that the health budget in England will rise from its current level of £101bn to £120bn by 2020-21; the NHS in England received an up-front cash injection of £6bn in 2016 as part of a wider £10bn package of additional funding; and the social care “precept” of up to 2% in council tax revenue will allow local councils to raise £2bn for social care provision.
“We are now witnessing first hand local authorities in some locations increasing their baseline fee levels by 4.5%, although many of the major providers are now only accepting a minimum of 6.5% fee uplift from the local authorities. While renewed financial commitment to the UK Health Sector is welcome, there remains a significant funding gap and a structural under provision of care beds.
“The Living Wage will likely put homes with less than 30 beds at risk of being unviable businesses – this equates to circa 100,000 care beds. To further compound the issue, this report has illustrated a net loss of 2,200 care beds in the UK over the last 12 months. This represents good news for the stellar operations as their occupancy levels should increase but it does also further the need for more investors to enter the sector to meet growing demand levels.”