The UK Care Home Market: 5 Part Series- Part 3: The business case.
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 2 we investigated the sector’s current funding sources and how a severe lack of public funds has led to an influx of private investors taking advantage of this lucrative asset class. In Part 3 we look at the business case for care home investment and why this sector has become so attractive for private investors.
Part 3 – The business case for investment.
With over £4.5bn worth of deals in 2014, according to CBRE UK, the UK healthcare market continues to provide a sustainable property investment asset class. UK banks and lenders are increasingly prepared to invest and support operators across the healthcare industry, based primarily on the country’s strong supporting demographic shift.
While lenders are increasingly willing to lend in the sector, private investors are increasingly willing to invest, with levels of investment increasing steadily skyrocketed in recent years. Long-term rental leases, ever increasing demand and structural under supply are attracting investors to this alternative property asset class.
In January 2015 Knight Frank undertook a property survey of 69 leading investors, developers and lenders in order to understand attitudes towards specialist investments. When asked “If you are planning to increase your exposure to specialist property, which sector(s) will you be targeting?” 70% of respondents named the UK healthcare market. The survey indicated a shift in investors’ focus towards specialist asset classes, which has contributed to the sector’s exponential growth in private funding.
According to the IPD’s Healthcare Index, healthcare property outperforms all other UK commercial property assets, with total returns increasing 3.4% 2013-2014, compared with an average increase of 1.5% across all UK property. This highlights the significant profitability and security of the sector as an asset class when compared with other UK property markets. Consistently producing robust returns since the index’s launch in 2007, the industry demonstrates a high level of market stability, adding to its extremely appealing risk-reward ratio.
As with any investment sector, increased demand improves market stability, and with official predictions stating that the population will continue ageing, demand is set to continue rising. Add to this, the care home exemption from George Osborne’s recently announced increase in stamp duty for property investment, and it is clear that this sector will looks set to be one of the UK’s most profitable property investment sectors for years to come.