The number of care home deals is “significantly ahead of pre-pandemic levels” with completions up by 78% in 2022 compared with 2020, according to Christie & Co.

In its first Care Market Review 2022 report, the specialist business property adviser said offers this year were at an average of 101% of asking price, reflecting strong investor appetite with competitive bidding commonplace.

Rob Kinsman, regional director – Care at Christie & Co, said: “The last couple of years have presented the sector with huge operational challenges, but it is heartening to see that investor appetite has fully recovered. We have confidence that the entrepreneurial nature of the sector will ensure the transactional market continues to thrive despite the growing economic headwinds.”

New instruction levels rose by around 30% from 2020 to 2021 as operators capitalised on buoyant market conditions and strong values achieved.

The most active buyer type over the past five years has been independent operators with one or two homes, which accounted for 41% of sector deals.

In 2022, corporate operators and investors have accounted for 33% of deals, with first-time buyers at 7%, down by 9% since 2018 due to increasing funding challenges, the regulatory burden of the CQC, and the increase in quality, higher value stock on the market.

The report says buyers were increasingly looking further afield due to a competitive marketplace and the increased use of technology in care homes which can allow for some operational work to be done remotely.

Almost half (48%) of deals in 2022 were concluded by buyers who live 100 miles from their target business.

A large number of deals were concluded in and around urban centres, although transactions in rural and coastal areas were also up.

Over 1,500 care homes ceased trading between 2015 and 2020 with over 40% of these having Good ratings and being closed for reasons other than quality, including margins and cost pressures.

A record 31% of the care homes Christie & Co sold in 2021 were on a closed basis – 56% of these were sold for ongoing healthcare use, whilst 26% were sold for residential conversion.

The number of closed care homes sold dropped to just 13% in 2022, however, an increasing proportion (80%) of these closed homes were sold to care home providers.

On funding, Christie & Co found rises in 2022/23 were well short of inflationary cost pressures with increases ranging from 3.1% to 12.8%.

Average residential fees in England rose by 5.4%, with nursing fees up by 6.8%.

Christie & Co said it expects the burden on self-funding clients to rise.

More than half of respondents (52%) reported widespread us of agency staff with some saying they had been successful in sourcing recruits from new overseas markets.

Additionally, 43% of providers said occupancy had returned to pre-pandemic levels, with 57% reporting occupancy was still recovering.

Larger providers reported lower overall average occupancy levels than smaller regional operators who saw rates largely back to pre-pandemic levels.

The majority reported good enquiry levels, suggesting a positive outlook for 2023.

Commercial finance specialist, Christie Finance, said it had seen 8% fewer funded deals in the sector this year with operators looking to their portfolios to expand or restructure existing debt.

The average loan size increased by 5.8%, suggesting that funding in the sector is evolving to provide more refinance to buy or expand.

First-time buyers making offers on care businesses fell from 48% in 2021 to 45% in 2022 due to the perceived difficulties in raising finance.

Christie & Co noted that this area of the market has been more challenging as the recognised lenders retrench to service existing operators with proven track records.