There is no doubt that people worldwide are living longer. As President Obama attempts to reform the US Health Care system and many European governments try to make their health care system self-funding people who are likely to live longer are worried about financing their lifestyle in their retirement years.
Nevertheless, as more and more people live beyond the age of 85 years, such patterns indicate growth in the provision of elderly care services. Hence, the demand for more Residential Care Homes globally. On the other hand, the opposing view is that given the burden placed on governments in western economies (USA & Europe) to cut public sector costs and debts which arise from bank bailouts, a significant number of elderly people will not receive government funding to meet their social elderly needs. Those who do receive funding, will be in the form of 1/2 hours community care in their homes from community carers. This could be a possible indication that that the care home sector will eventually fall to the way side. Moreover, high taxes, little individual savings and near zero pension makes many wonder who will actually pick up the bill for elderly care services.
One can quickly reach to the conclusion that there in little opportunity for rental yield and capital gains for portfolio builders thinking of entering this sector. Thus, it is debatable whether care homes is a rising star or a foregone conclusion. A dead horse! A truthful and architectural answer to the latter question lies in the role of the private sector and they way in which they devised their financing strategy.
The author has reach the following conclusion based on his own observations:
- Future demand will come from private service users who are equity rich and far less from government funded service users.
- Investors entering the industry will need to find innovative sources of revenue and not rely solely on residents fees.
- The methods use to finance elderly care must be modernised, taking into account different sources of payments from service users.
- Owners & Investors must seek out opportunities further afield to balance risk and liability, as well keep leverage to a minimum.
In conclusion, Care home portfolios is like to become a rising star but will new rules to financial success.
