SAVILLS European Research predict European care home investment to remain active despite the health crisis as the sector attracts investors seeking secure, long-term income streams backed by solid long-term fundamentals. Competition for care home assets continue to put upward pressure on prices. European investors’ strong market knowledge and knowhow provide them with a solid grip on their markets. The aging population increasingly needs care services and puts strong pressure on European social care budgets.
Increase in demand for care and social services properties has provided new opportunities for investors. Worth EUR 3.6 bn of care home transactions were concluded in Europe in Q1-Q3 2020. Finland is one of European strategic care home markets targeted by investors. Apart from local property funds there are foreign investors such as Aedifica and SBB investing in care home and health care properties in Finland. According to KTI estimates, the total market value of all public use properties amounted to EUR 5.1 bn, of which health care properties accounted for EUR 3.6 bn at the end of 2019 in Finland.
Care housing is the fastest growing sector of social services. Rapidly ageing population and migration to major cities require sustainable solutions. From 2020 onwards the total population of the EU-27 is estimated to increase from 447.7 million to peak at 449.3 million by 2026, before decline throughout the century driven by historically low fertility rates and increasing life expectancy. By 2050, the aged 65+ will account for 30% of the total population from 20% currently. Along with Italy, Germany and Portugal, Finland’s population is one of the fastest aging in Europe.
For the EU, public expenditure on long-term care is projected to increase from 1.6% to 2.7% of GDP between 2016 and 2070. Assuming a constant provision rate over the next decade, about 775,000 new beds will be needed in the reported 10 European countries, incl. Finland, to face the growing number of elderly people. In Finland, housing services for the elderly in around-the-clock care accounted for EUR 1.14 bn in 2018, of which services bought from private operators accounted for about MEUR 609, up 2.5% year on year. By 2030, Finland will need 2,200 new care homes. Construction output turned to a considerable increase in 2016. The spread of service vouchers speeds up the construction of private care home and day-care properties.
Across Europe, the private sector accounts for approximately 30% of the total bed capacity, with large differences between countries. Outsourcing of the public sector services has increased rapidly in Finland. As elsewhere in Europe, consolidation is in progress increasing the market domination by a few private operator chains. As a result of growing pattern towards home care in Europe and of Covid-19 new care home concepts will emerge from the crisis. Some care home operators are looking into the new elderly care solution by offering both care home and home care services.
More in detail information: Savills Spotlight European Care Homes, November 2020
Irma Jokinen, researcher
irma.jokinen@gemproperty.fi