February 20, 2020 Finance

Not the only grey in the village – the case for funding and investing in assisted living assets

By Elliot Blatt, Investment Associate at property finance experts ASK

According to the estate agents Savills, more than €700m was invested into the senior living sector across the UK and Europe in 2019 – a record high. But why is this?
The answer begins with demographics.
The Office for National Statistics (ONS) calculates that there are around 12 million people aged 65 and over in the UK, and by 2030 there are projected to be 14 million people (one in five of the population) who will be that age or older.
And as every good Healthcare Business reader will know, not only are there more older people in the UK, but those people are living longer and therefore spending far more of their time in retirement than previous generations.
Moreover, according to research from property consultancy Knight Frank, around a quarter of those over-55 would consider downsizing or moving into some sort of retirement, or purpose-built, accommodation.
Sector fundamentals are favourable
And herein lies the opportunity for providers, developers and investors involved in assisted living.
That’s because there is currently a shortfall in the provision of such accommodation. And yet, if there really are a quarter of over-55s prepared to downsize or move into some sort of retirement housing, and assuming that that view holds true for the over-65s, then there would appear to be a huge potential market for assisted living – approximately 3.5million people by 2030 based on the ONS population projections.
Not only that, but it would appear that many older people in this category would also have the means to pay for assisted living. Again, a Knight Frank analysis found that around 2.2 million over-65 households live in a property with an average value of up to £250,000, 1.9 million live in a property with a value between £250,000 and £500,000, and some 812,000 live in properties worth more than £500,000.
There is also the fact that the bulk of UK retirement housing (around 70%) currently has limited on-site care. By contrast, assisted living and housing with care only has around a 30% market share. Moreover, the majority of retirement units across the country were constructed between the 1970s and 1990s.
This obviously means that there is limited supply of the types of assisted living schemes which the above mentioned demographics either require or, indeed, would find appealing given the age of much of the existing retirement housing stock.
Lest anyone be in any doubt as to how the projected future demand for assisted living looks set to outstrip supply, a further analysis by Knight Frank found that there are around four people wanting to downsize for every existing retirement living home in the UK.

Funding and investment opportunities are compelling
The UK also compares favourably with other countries when it comes to investment opportunities in senior living. Indeed, Savills have created their own Senior Housing Opportunity Index, which ranked the UK as third globally for offering excellent investment opportunities.
Moreover, Savills also noted the less cyclical nature of senior living as an asset type makes it particularly appealing to investors, and their research found that, on average, the yield discount that senior housing offers over other asset classes ranges between 100 bps over prime multifamily and 66 bps over prime CBD-offices. In fact, the prime senior housing yield currently ranges between 3.5% and 5% for direct-let, depending on the country, location and quality of asset. Furthermore, the lack of debt liquidity in the senior living sector means higher margins for lenders that are willing to fund such assets.
However, along with all the facts and stats, there is the personal element. Once children fly the nest, many people living in a valuable but mostly empty family home often wonder whether it makes sense trying to look after a large property. And with advances in medicine meaning we are all more likely to live longer – but will often also be managing long term health conditions – it raises the question of how we can be better supported, whilst maintaining as much of the independence that we all value so much.
So perhaps the final question providers, developers and investors should ask themselves is quite simply – what type of retirement accommodation would they want to live in? And then build, fund or invest accordingly.



Contact ASK on:

0203 976 6700



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