UK Care Homes A Growth Opportunity
Do we have enough homes?
As mentioned, the UK’s ageing population does not look like it will be slowing down. It has been reported by the Lancet that the UK will need an additional 71,000 more care home places in 8 years and that there will be an additional 335,000 more elderly people by 2025 who will have demanding needs. However, due to considerable financial pressure, the building of publicly funded care homes has declined. Over recent years spending cuts and pressure on budgets have meant that Local Authorities are unable to provide adequate services for an ageing population. This has, in turn, impacted an already stretched National Health Service.
Purpose built Care Homes
Historically central government would build care homes; however, these homes have always lacked investment and in the vast part are not fit for purpose in the modern era, especially when you consider the requirements set out by the Care Quality Commission. The need for purpose-built, fit for purpose care homes is of serious concern for the families of private residents, who need to ensure that their loved ones are adequately cared for. According to government figures in 10 years (2029), there will be a need for a further 200,000 beds. The fees payable for these private beds show a growth opportunity of 7% per annum. From this, we can conclude the private care home sector is on a trajectory of growth given a backdrop of inadequate existing facilities and budget pressure on local authorities.
UK will need an additional 71,000 more care home places in 8 years
long terms. Their recommendations have highlighted the opportunities available to care home operators. The recommendations have included increasing weekly fees with a 75%+ exposure to local authority funding without requiring a reduction in private fees. More importantly, they have recommended that local authorities plan for care homes in their own regions and to ensure there is enough capacity.
What does it take to be successful?
The post-war era elderly demographic has access to large disposal incomes and as such, they are willing to pay for superior nursing or residential care. To become a successful operator in the care home sector, future providers, must build a successful brand with a competent customer journey which should outline
- The high quality of care a resident should expect.
- Quality of facilities, including purpose-built facilities, ensuite rooms, couples rooms, and attractive landscaping.
- Welcoming and warm environment for residents and their families.
- Activities for all abilities and interests.
- Communication and engagement with family members.
The result of offering access to purpose-built facilities allows private operators to charge a premium price of 30% or more than those in the public sector, however, the higher premiums need to be offset for staff wages and in particular meeting the demand for the minimum living wage. In spite of the additional costs and need for a satisfactory customer journey, the private care home sector has shown considerable investment over the last 5 years and offers substantial long term sustainable rental yields for infrastructure investors.
Azurian Capital’s Healthcare team can help facilitate the financing needs of care home providers, developers and operators. Our experience within the sector and knowledge of what it takes to succeed will hold future operators in good stead.