Investors are showing increasing interest in the elderly care real estate market as they watch an increasingly wealthy cohort of over-85s heading in the direction of care homes.
An opinion piece by Kenneth MacKenzie, managing partner at property investment firm Target Advisers, says that the opportunity is to deliver value to the 15% of over-85s that are expected need and use some sort of residential care.
In a piece for the Financial Times, Mackenzie writes: “To meet this demand, the UK’s ageing care-home stock needs a substantial upgrade – only 20% of homes have been built since the turn of the century and so there is a necessity for investment in modern, purpose-built healthcare facilities run by quality care operators.
“The specialist investor in the sector should be able to obtain very attractive income streams secured against real assets, which compare favourably with other real estate assets.”
Mackenzie admits there are some headwinds, including the squeeze on authority funding, the implementation of the National Living Wage, and the delay to introducing a lifetime cap of £72,000 on an individual’s care costs.
But he concludes that the right quality of care from well-run businesses will find a market. “The lessons first expressed by Florence Nightingale in the nineteenth century about ensuring high standards of care, both clinical and social, still hold true today – if the underlying care fundamentals are strong then the financial performance typically follows,” he states.