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The emergence of retirement homes in the UK

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10th Jul 2018 | by Dani | 0 Comments

Rising number of dementia suffers has caused an increased reliance on nursing home services

As Britain’s population ages and treatment for other diseases becomes more advanced, dementia has taken over heart disease as being the leading cause of death. Over the 7 years between 2007 and 2014, the number of people living with dementia has increased by 62%, and that number is set to rise even further. One million people are predicted to be suffering from the disease by 2025, and this will increase to two million by 2050.

Dementia is caused when the brain is damaged by diseases, primarily Alzheimer’s, but there are other diseases that can cause damage to the brain as well. Brain cells are destroyed by the disease, affecting their ability to communicate with each other. Symptoms can include difficulty in thinking and problem solving, which gradually get worse and can cause the individual trouble performing everyday activities.

Dementia can be highly distressing for the person suffering from it, as they find themselves unable to do the things they used to or recall precious memories and can get easily confused. It can also be upsetting for family members to have to look after someone with a reduced independence and witness their loved one in distress.

As the disease progresses and the individual’s cognitive skills decline, the family may decide that they need 24-hour nursing care.

What is the function of a nursing home and who do they accommodate?

Nursing homes often specialise in the care of a patient who is suffering from a degenerative disease such as dementia. They have specialist equipment to care for the needs of patients, so are often better options for bed-bound individuals or those with mobility problems.

Nursing homes employ staff who are specially trained to deal with individuals suffering from illnesses, and the décor is tailored to ensure patients feel comfortable in their surroundings, e.g. calming decorations, signage, sensory gardens or memory walls to help combat memory loss.

Elderly patients are often assessed prior to admission to decide whether a residential or nursing care home is best suited to their needs and whether they will require additional care in the future.

The potential of the UK care home market

The UK’s leaders in Healthcare research provider, LaingBuisson, estimates the addressable UK market value of homecare and supported living at £6.5billion in 2014/15.

Property developers are helping to satisfy that demand by building suitable specialist care facilities. Care home developers typically identify an existing care home that needs a refurbishment or a turnaround situation. Many care homes that were supported by government funding as social care cutback have been implemented due to budgetary financial deficits.

Closed social care homes have been snapped up by developers and freehold block separated into individual leaseholds (sectional title. Investors are invited to purchase individual suites in a care home. The suites are then leased back by the property developer at 8% -10% net per annum on a long lease.

The developer employs the skills of a specialist care home management company to oversee the day-to-day running of the care home.

Luxury retirement vs nursing homes as an investment

People are living longer, and they tend to want to stay local. That is why it some developers have strategically decided to build luxury retirement villages in areas of the south west of England which have the highest demand. The areas typically have 25% of residents over the age of 65 with an acute shortage of suitable sites for development due to restrictive panning permission.

These later living communities would cater for abled bodies retirees that are not yet in need of specialist dementia care. This provides a funnel of potential residents into the nursing care facility.

This niche market is targeting those who desire more luxurious surroundings. These properties are typically attractive conversions of Victorian properties; which are stylishly refurbished to a high specification that their self-funding patients expect. The environments provide an assisted living environment whereby the guests can retain their independence and have of the following services provided:

Meals and accommodation
Emotional and physical support
Help with personal care
Social activities
Wine tasting events

These luxury retirement homes and villages differ from nursing homes in that they do not primarily accommodate those with degenerative diseases, but more those who either need a small amount of assistance with personal care, wish to downsize, or want to expand their social and support network to combat loneliness.

Sustainability of the luxury retirement homes vs nursing homes as an investment

There are certain challenges to specialist nursing homes which require that 60% of their income is spent on staff costs. “With the increase in the National Living Wage and distinct shortage of nursing staff, the operational costs could eat away at potential profits and that is why we at One Touch Investment focus on luxury retirement properties” says Arran Kerkvliet.

Luxury retirement homes are not reliant on the same number of nursing staff, as many occupants are still fully able and do not require specialist help. Also, they are not dependent on funding from local councils, as the residents are usually self-funded. Knight Frank estimates that the over 60s in the UK have over £1,200bn in unmortgaged housing wealth, indicating that the generation is more than able to pay the fees luxury retirement villages and homes command.

Many are recognising the attraction of the investment class, and around £3 – 4bn has been pumped into specialist retirement housing in private funding alone. There is still scope for individuals to invest in this sector though.

Luxury retirement home investment opportunities

Lindors is a luxury retirement home investment based in Wye Valley, an Area of Outstanding Natural Beauty that spans several counties in Wales and bordering Wales including Gloucestershire. Currently 20.8% of the county’s population is aged 65 or over, which is higher than the national average. Furthermore, this age group is increasing more than any other. From 2015 – 2016 it grew by 2.2%, outstripping the national average and the average for the south west, in which the county is located.

Throughout 2018 the developer will transform the 19th century country house into 23 luxury suites and lodges, offering spectacular views of the 9-acre grounds. Accommodation will be available for both short-term and long-term stays and this flexibility will be beneficial in terms of occupancy levels. Residents can enjoy the beautiful surroundings by taking scenic walks or if they prefer something slower-pace, they can stay in and take advantage of the onsite amenities. To cultivate a community, regular wine tasting and fine dining activities will be held.

South Africans can purchase a suite in Lindor’s from R1.35m and benefit from it being a fully managed investment, which means overseas investors would not have to concern themselves with the day-to-day running of the suite. A 10% return is guaranteed over a ten-year commercial lease.

It is not just One Touch Investment who think this is a good sector, wealth manager L&G as recently acquired a portfolio of £500m later living communities. If you wish to explore this further, download the retirement home investment sector guide or arrange face to face meeting with their consultants who will be visiting South Africa between the 17th and 27th of July.

You can also meet with One Touch in person @ Simbithi Country Club on Friday the 20th of July.

Register here to qualify for this U.K retirement property seminar at which you learn about the best areas for investment, examples of recent case studies, new retirement property launches, tax implications and the purchase process.