Advertorial: how to invest in retirement homes

One Touch Property takes a look at retirement living and how an individual can make smart investment decisions.

According to parliament.uk, between 2015 and 2020 the number of over 65s residing in the UK is meant to increase by 12%. The number of those aged 85+ is meant to increase by 18%. The government and local authorities are already struggling to meet the needs of the elderly already in their care. The increased pressure on services will mean that their struggle will be almost impossible to overcome.

With the improving quality of medicines, people are living longer in the UK. Whilst it is nice to think that more people will live long and healthy lives, unfortunately that is not always the case. Many develop health problems in their later years. This means that they may need extensive care. Research conducted by Newcastle University academics shows that in eight years, there will be a shortage of approximately 71,000 care beds as there will be an extra 353,000 older patients with complex care needs. Not only is there an urgent need for more care beds, but doubt has been cast over whether the current care homes in the UK are financially sustainable. 

Research by the London School of Economics has found that social care funding would need to increase by 4.4% above inflation until 2035 to cater for the needs of the ageing population. There is currently a shortfall in funding of £1bn a year according to the Competition and Markets Authority.

Headwinds faced by the care home industry – a shortage of staff and a struggle to recruit nurses with adequate skill-sets

Inadequate local authority funding has meant that working in a care home has become unpopular with nurses. Care homes are often under-resourced and understaffed, meaning that existing employees work long hours with little reward. A 2016 report by Skills for Care found that each year just under 340,000 social care employees leave their job. Brexit and the poor performance of the pound will compound the problem. This would dissuade those from the EU coming to the UK to work and sending money back home. Over the past three years, the number of non-British EU nationals working in the care system shot up by over 40%, but if they leave the UK will struggle to replace them. 

Analysis published by the Institute for Public Policy Research shows that the UK will have to train up and recruit 1.6 million healthcare workers by 2022. A shortage of qualified nurses will have a larger impact on the care home industry, which caters for elderly patients with specific medical requirements, as opposed to retirement homes which can accommodate those looking to downsize or live with other people again. 

Retirement living investments – a more robust alternative 

Retirement home investments provide lucrative returns and with an ageing population there is a sustained market for their usage. Recognising the undersupply of retirement homes in the UK housing market, last year Legal & General acquired an existing UK operator and £40m of assets. In assessing the market, the company discovered that the retirement home asset class was one of the most undersupplied in the housing market. According to estimates, 3.3 million people in the UK wish to downsize, but only 7,000 specialise homes were built to accommodate them. 

Retirement homes are generally located in retirement hotspots in the UK, such as the Isle of Wight and Devon. Those in their later years tend to give up the hustle and bustle of city living and gravitate towards the countryside.

Luxury retirement homes host a wealth of social activities to combat loneliness, which can negatively affect health as much as smoking 15 cigarettes a day. These activities range to suit individual interests from fine dining to wine tasting to daily excursions. The homes also have amenities that you would associate with luxury living, such as an on-site award-winning chef, spa, hair and beauty salons.

Retirement home investments – the fundamentals 

These retirement home investments typically offer an annual return of 10% over a ten-year commercial lease. The suite is leased back to the developer for a fee and then operated by an experienced management company. It is completely hands-off for the investor, who only needs to concern themselves with what to do with the income received. These are also classed as commercial property, and as many of the suites are under £150,000 they are exempt from stamp duty charges. 

Retirement homes are not under the same pressures that care homes are currently facing in terms of nursing staff shortages, increases in the minimum wage or lack of funding from the local government. They provide a service not specifically for those with complex medical needs, but for those either looking to release equity from their property, or who wish to spend time with other like-minded individuals meaning that they are usually self-funded. The increasing popularity of retirement living in the UK, the UK’s ageing population and the shortage of appropriate retirement living suites provides an ideal investment environment. Large corporations are recognising the gap in the market for retirement home investment and have begun investing millions into the sector. Opportunities tailored towards the individual investor and offered by One Touch Property often sell out within a few days. If large businesses and private investors are recognising the benefit of retirement home investing both socially and financially, will it pique your interest? 

About One Touch Property – an award-winning property investment company

One Touch Property have been sourcing investment opportunities in the property sector for almost a decade. Throughout that time, they have had plenty of experience in picking opportunities in robust sectors and in areas of high demand. Readers can download their bespoke 24-page report that discusses the care home industry in the UK and how individuals can benefit from investing in the sector if they choose the correct location and type of care home.

This is a paid-for promotion by One Touch Property. The views expressed do not necessarily represent those of loveMONEY. The information included in this article does not constitute regulated financial advice. You should seek out independent, professional financial advice before making an investment decision.