Will care home investments be the next big thing?

The UK is set to witness a stark rise in the number of people aged over 85 who require care over the next 35 years.

Rising life expectancy rates and a high demand for beds have sparked investor interest, as many consider the non-discretionary nature of the sector as a hotbed for investment.

Ageing population

Currently there are 4 people of working age for each person aged over 65 and this number is set to halve in the next 35 years.

What’s more, the number of people aged over 85 is predicted to double over the next 20 years. An ever-expanding ageing population coupled with rising life expectancy rates will no doubt add pressure to a sector which is in dire need of investment.

Around 15% of over 85s are expected to require residential care in one shape or form. Many existing facilities are now dated and require a substantial overhaul to provide the best quality care.

Investment in modern, purpose-build healthcare properties, operated by well-established operators could build the bridge between current supply and demand.

Factors for consideration

Among other things, investors should consider a few new variables which may affect their care home investment.

The government’s recent announcement that care workers should receive the national living wage has been welcomed by many however, investors should ensure that the opportunity they are considering has factored in this pay increase.

Also, the spending cap – outlined in the Dilnot Report – whereby an individual’s personal care costs would be capped at £75,000 is something people should consider. The cap has been pushed back to 2020 however, many experts believe that a cap will never be introduced.

Changes to legislation are not the only factors investors should consider. Location is an important element that investors should consider. The care sector is not limited to big cities. It is often smaller communities or areas on the outskirts of a town or city which would benefit the most from a care facility.

Investors should look to buy in a location that has a large proportion of people aged over 65 and in areas where there is already a high occupancy rates in existing facilities.

A Management Company with a good reputation will also go a long way when it comes to attracting residents. Investors should check what the CQC (Care Quality Commission) has reported about the company before investing.

Care home investments

Typically investors can purchase an individual room within a care facility which is then let out on a leasehold basis to a reputable care operator.

Investors can expect to generate a long-term rental income from an asset class which is vital to the UK’s economy.

Care home investments could provide property investors with a way to diversify their property portfolio and generate a stable income from the asset class.

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