“Bumper year” for senior housing investment and growth

This year has been a record year for investment into the UK’s senior housing sector – according to new research by global property consultancy Knight Frank

Using data from the firm’s in-house deal tracker, Knight Frank forecasts that a total £1.5 billion will have been invested into the senior housing sector by the end of the year.

Tom Scaife, head of seniors housing at Knight Frank, said: “There is now a clear and extensive range of tenures and offerings available, providing a variety of services and amenities to suit a range of needs, demographics and price points. The investment case remains an extremely compelling one, with the market being driven by demographic changes, seniors’ property wealth, and a weight of capital seeking diversification.

“With so much activity taking place in the senior housing sector this year, it’s no wonder we’ve witnessed a bumper year for investment.”

Further research by Knight Frank has found that while ‘Retirement Housing’ pricing largely tracks average house prices for residential property in England and Wales, ‘Housing with Care’ is outperforming it. According to Knight Frank, ‘Housing with Care’ property prices increased on average by 20% over the last five years.

Michael Voges, executive director of ARCO, backed up the findings, saying its members “…have reported a sharp increase in demand for Retirement Communities – particularly in the mid-market.
“This trend only accelerated during the coronavirus crisis as more older people have sought good quality housing, support, the security of access to care if they need it, and to be closer to community. We are seeing increasing interest in our sector across the board – politically, from new operators entering the market, from investors and from older people’s advocates. We are confident that if the Government implements much needed reforms we will see very significant increases in supply in the coming years.”

Lauren Harwood, head of seniors housing research at Knight Frank, predicted the market would continue to heat up.
:“In the next five years, we expect to see a race to scale and brand building from some of the early movers to create management platforms with operational efficiencies. Accordingly, we expect the number of specialist seniors housing units across the UK to grow by approx. 10% over this time,” she said.

In absolute terms, this will take the total number of seniors housing units in the UK to more than 800,000 by 2024, up from around 735,000 currently.

Despite this growth, there remains a significant supply and demand imbalance – one which puts the UK far behind peer countries, says Knight Frank.

Compared to the penetration rates in Australia (5%), New Zealand (5.5%) and the United States (6%), the UK’s penetration rate in the Housing with Market stands at just 0.82%. Knight Frank predicts that for the UK to catch up with its peers in delivering much needed seniors housing, at least, 400,000 additional Housing with Care units need to be delivered.

Date published: November 25, 2020