The Reason Now Is The Best Time To Invest In A Care Home Property

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Care home investment UK offers investors who wish to build their property portfolio with alternatives to the more traditional buy-to-let residential properties a high-demand and high-return option. Care homes are a growing asset class that can provide its investors with a substantial financial return. In addition, in the long-term, it can also be used as a future residence for the investor themselves or a loved one.

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Are Care Homes A Good Investment For You?

In 2014 there were over £4.5 billion worth of deals within the care home sector, a number which tends to validate this type property investment as a sustainable strategy.

According to IPD’s Annual Healthcare Property Index results the healthcare property sector out-performed all other UK property assets. The total earnings increased by 3.4% in whilst other all other UK property had an average increase of just 1.5%.

The care home industry has been demonstrating a high level of market stability and an appealing risk-reward ratio since the index’s launch in 2007. For this reason, investors see this asset class as a great investment with consistently robust returns.

The fact is that many investors are looking at the healthcare market for future investment opportunities. A property survey carried out by Knight Frank in January 2015 asked 69 investors, developers and lenders a series of questions to find out what their attitudes towards specialist property investments were. When the target group were asked, “if you are planning to increase your exposure to specialist property, which sector will you be targeting?” The results of the survey indicated a shift in investors’ focus towards specialist asset classes as 70% of them named the UK healthcare market as the sector they would target. This shift in focus is one factor contributing to the care sector’s exponential growth in private funding.

The future of care home investment opportunities in the UK is forecast to be strong due to the sustainable demand and one of the highest returns of any property asset class. Care home investments give investors an income-generating asset whilst also providing social support to a significant demographic of the UK population – so this is an investment that, as well as making financial sense, you can also feel good about as it is helping fill a gaping hole in appropriate and affordable accommodation for seniors.

If you are looking for a long-term investment with a 10-year rental assurance of up to 10% per annum and a buy back option of up to 125% of purchase price then you need to look at care home investments. Care home investments are also in high demand and have extremely high occupancy rates as a result.

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What to Consider in Care Home Investments

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Care home investments can provide similar benefits to a buy-to-let investment with longer leases and arguably higher returns. They also provide benefits to the community by providing private funding for a sector that is experiencing a chronic under-supply as the public funding has consistently decreased over the years.

However, despite the many positives investors must go into these investments with eyes open and do the appropriate research.

Many care home investments will be off-plan – investors purchase the plot before the construction is completed, this gives the developer some pre-sales to satisfy their financial-backers, whilst offering the investor the chance of some instant capital appreciation as the off-plan purchase price will be significantly lower than the property’s value upon completion. The time from buying off-plan to the completion of the development can be anything from six months to two years so when buying off-plan it is important to research the developer and their track record thoroughly.

Developers with transparency and a track record of delivering for investors and whose principal management have a good history in construction and investment will obviously give investors peace of mind, so be sure that you do your due diligence.

Another huge factor in any property investment is location. Location is still important even in a property investment like care homes which is under-supplied and with predicted increased demand for years to come.

A good location, like any location in property investment, is one which is attractive to your target market. So, for care homes you will be looking at nice, quiet non-urban locations, in areas which are already popular with seniors.

As well as location, with care home investments you need to consider the quality of the development and the level of care residents will receive. Even though there is a chronic under-supply, families will not want to place their loved ones in a sub-standard home, so pay attention to these factors when deciding which investment to choose.

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The Aging Population - Number of Elderly UK Residents Rise

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The market for care home investments is driven by the rising life expectancy of residents in the UK.

The Office for National Statistics found that in the UK the population is older than ever, with people aged 65 and over making up around 18% of the total UK population (11.4 million people). This figure is estimated to rise to 25% by the year 2044. On top of this, the number of people aged 75 and over is increasing, making up about 8% of the population.

The rising numbers of seniors is mirrored by the rising demand for long-term health care facilities. Currently, occupied beds cost the NHS about £250 a day and a predicted 61% of these beds are lost because people are waiting for space in a care or residential home.

Care home investments and developments from private sectors are relieving the pressure on the NHS by helping to combat this problem.

Between 2005 and 2014 there were reductions in public spending on social care for the elderly by 18%, leaving the UK care sector significantly underfunded. The lack of public funding has opened the door to profit-seeking private investors looking to take advantage of the high demand.

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The Current Situation Requires More Care Home Investments

A report by the Joseph Rowntree Foundation stated, “To keep pace with the demographic pressures over the next 50 years, residential and nursing home places in the UK would need to expand by around 150% and numbers of hours of home care by around 140%”.

As a result, UK care home investments are rapidly becoming a popular alternative to traditional investment opportunities for investors wanting to profit from a growing sector. Demand for care homes is forecast to increase by 60% by the time we reach 2023 due to increasing life expectancy.

If you are looking for a secure and profitable investment, a UK care home investment can offer great returns for a set period. Care home investments will make a good addition to a property portfolio as it is fairly low risk and hands-free. Just be sure to do your due diligence and understand exactly what you are getting into before you sign on the dotted line.

Now Is The Best Time To Invest In A Care Home Property

At Sterling Woodrow, we pride ourselves on helping new property investors get a solid start in the market and are happy to speak to you about your long-term goals and ambitions in property investment.

We also work with experienced investors to help them increase the value and profitability of their portfolios.

To book your complimentary property investment consultation with one of our senior portfolio managers simply click the button below and complete the short form below and we will call you back at the appropriate time.

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