Luxury Care Home vs. Government Funded Care Homes

With over 18% of the United Kingdom’s population aged 65 or older, there is a massive need for specialist care. On top of this, the 85+ demographic in the UK has proven to be the fastest growing age group, with a further 106% projected growth to 2.6 million over the next 20 years. Given the recent budget cuts, there is an undeniable gap for specialised care for the elderly in the UK. Being a £16 billion industry, the care home market offers investors two investment options; luxury care homes and government funded care homes. Each of the options have their advantages and disadvantages, it is entirely dependent on what you are looking for as an investor.

Luxury care homes are becoming popular for investors looking to make quick, high returns. These types of homes are popular within the elderly demographic with higher personal assets. These homes are reliant on the individual’s private wealth as they are fully responsible to fund their care. On the other hand, government funded care homes are financed by local authorities, with the aid of private investors to offer specialised care to elder citizens, and ensure that their medical and care needs have been met. With local authorities responsible for 69% of care homes within the UK, private investors have injected about £15 million into the market to help with the development and refurbishment of care homes across the UK.

Luxury care homes offer many amnesties for residents, with the aim of improving the quality of life and experience in these homes and increasing the value of their stay. Due to this, the weekly rentals tend to be higher than government funded care homes, meaning that higher returns are paid to the investors. To add, because of the higher paying clientele within a luxury care home and in subsequence the higher rental rates, luxury care homes typically have a higher residents turnover when compared to government funded establishments. Research also shows that the conditions within luxury care homes do in fact improve quality of life of the elderly citizens. However, the same research is conducted across the whole market both luxury and non meaning all homes are held to the same standards. In addition, it has been stated that there will be £76 million invested annually into equipping authority funded care homes with spas, hairdressers and other luxury features to improve the quality of life.

Luxury care homes have the disadvantage of having to spend significant amounts in advertising and marketing to attract the clientele, a cost which isn’t applicable to government funded facilities. As mentioned, luxury care homes are reliant on the individuals’ private wealth which can change throughout the years and also in turn minimises the potential target demographic who would be able to afford such care. To add, there is only 5% of the UK’s population that are financially independent upon retirement. Age UK reports that 16% of retirees live in poverty with a household income standing at 60% less than the average. This conveys the massive demographic of potential residents for care homes that are government funded, a significant advantage.

Another extremely important factor to consider when selecting the type of care home investment to make, is the survivability of the establishment during economic fluctuations. Luxury care homes are susceptible to being affected with economic downfalls, or even changes in the GDP as, the less money the elderly have to spend, the smaller the demand for luxury care homes become. Although care for the elderly is a constant, and there will always be an inevitable demand for such services, the ability to pay for a luxury development is where the accessibility to the service is significantly compromised. With government funded care homes, the investment opportunity is considered recession-proof as the demand will always exist, and the need for government funding will continue to exist regardless of economic conditions.

To learn more about investment opportunities in care homes contact us by calling 0203 875 0837 or emailing enquiries@hylifeinvest.com.

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