The UK Care Home Market: 5 Part Series - Part 2: Current Funding.
Select Portfolio offers a unique range of care home investment opportunities, designed to provide a lucrative and sustainable source of income, while simultaneously acting as an investment in the future of our loved ones. We’ve put together an insightful five part series looking, in detail, at the care home investment sector and why it is becoming increasingly vital to the UK’s future.
In Part 1 we discussed the UK’s ageing demographic and the increased demand for quality care that this has created. In part 2 we investigate the sector’s current sources of funds and how a dire lack of public sector funding, combined with continually increasing costs, has created an increasing need for private care investment.
Part 2: The Sector’s Current Funding.
While a small percentage of funding in healthcare property is sourced from the public and non-profit sectors, the majority has continued to come from private investors, who are able to take advantage of the industry’s growing demand and continuous undersupply, to make considerable financial returns.
Over the past decade the need for investment in healthcare property has continually increased, while public funding has continuously decreased. Between 2005 and 2014 there was an 18% reduction in public spend on social care for the elderly, while the number over 65s increased significantly. Compared with the rest of the world, the proportion of healthcare funding the UK receives from the public sector is amongst the lowest, with only the United States and Germany being lower, according to Knight Frank’s research.
This lack of public funding has, according to a report by Thinktank ResPublica, left the care sector significantly underfunded. Without a substantial increase in investment, the sector could face losing 37,000 care home beds by 2020; leaving more elderly people to stay in general hospitals at an added cost of £3bn per year to the NHS and the UK taxpayer. The report predicts that by 2020-21 the industry will need an added £1.1bn investment. As the public sector continues to resist calls to increase funding, this makes private sector funding increasingly vital to the continued viability of the sector.
The UK’s ageing population provides the care home sector with one of the most stable demand streams of any investment asset class. Each year that the population ages, more elderly people are in need of care - this increased demand, combined with a severe undersupply, drives prices up and increases investor profits.
In part 3 of our care home investment series we’ll investigate in more detail the business case for investment within the care home market and how private investors are making substantial long-term returns.