High demand coupled with low supply are generally the key ingredients for a lucrative investment opportunity – nowhere is this more true than in the care home sector. As in much of the western world, the UK is ageing at a significant rate, and it’s a trend which shows no sign of reversing: over 65s currently make up 18% of the population, and this figure is set to rise to over 25% by 2044. As a result, there is a huge mismatch in the ability of the care industry to deliver vital services to the elderly and, with the recent years of austerity having slashed public investment, the shortfall in the supply of good care homes will have to be made up by the private sector.
Care home investments – by both private and institutional investors – have risen sharply in recent years, driven by the under-supply of care home beds and the associated strong rental yields, high occupancy rates and healthy capital appreciation that these investments deliver. Moreover, being classed as a commercial asset, care home investments are not subject to the volatility that can be seen in the wider residential market, and so represent a sound defensive addition to one’s portfolio.