Steady growth forecast for the UK Care Homes Construction Market

Care home capacity has increased over the last 5 years and total care home sector revenue increased by an estimated 4.3% in 2014. There are now almost 20,000 care homes, nursing homes and residential homes providing adult and elderly care throughout the UK, of which the majority are operated by the independent sector or voluntary organisations, with the remainder NHS or local authority operated.

The private care home market in the UK is highly fragmented with a mix between several larger operators and a wide base of small providers - 80% of providers own just one care home. There has been a significant drop in the number of available places in local authority residential care homes, with government austerity measures impacting local authority budgets, combined with an ageing population to drive an increase in demand for care homes sector. The introduction of the new Living Wage legislation is also expected to further challenge the local authority care home sector as operational costs increase, though this has partially been mitigated by the recent announcement of a special optional precept on Council Tax increases for higher funding for social care. 

In England and Wales, demand for care home operators to build new facilities is still strong, with many new care homes registered during 2014/15. Nearly all new care home development currently taking place is targeted at private payers in affluent areas of the country, such as the South East. As a result, care home investors and developers are now seeking sites and homes in these strong regional locations, although the rest of the UK is also seeing a growth in new build care homes. However, the competition for land, particularly from the residential development market is reducing the number of readily available opportunities.

Despite substantial investment in new and refurbished capacity within the independent sector during the last 20 years, a considerable amount of existing care home stock is still classed as sub-standard. Further substantial investment in capacity will be required going forward as demand for care homes continues to rise in line with estimated rises in the elderly population, and those with conditions requiring specialist care such as dementia. One area of future growth in the sector is expected to be in nursing and dementia care homes for residents with high dependency needs.

Demand for care home places is also expected to rise steadily over the next 5-10 years. It is estimated that at least an extra 6,700 net new places will be needed each year to 2020 to satisfy demand in both the public and private care home sectors. This factor, together with underlying demographics and major funding issues, is driving activity in the new-build care home sector with growth focused specifically in the ‘for profit’ sector.

“The upturn in the economy and increasing availability of development funding should increase the likelihood of further development” said Andrew Hartley, Director of AMA Research. “However, despite being driven by the demographics of an ageing population, the market faces increasing pressures of central government under-funding and stiff competition for available land from the volume house-builders, though recently announced additional funding for local authority social care budgets will help improve the situation in the medium term”

The ‘Care Homes Construction Market Report – UK 2015-2019 Analysis’ is published by AMA Research, a leading provider of market research and consultancy services within the construction and home improvement markets. The report is available now and can be ordered online at www.amaresearch.co.uk or by calling 01242 235724.