What is the market like?
Despite the uncertainty of the current economic climate, the care home sector is healthy enough at the moment. This is due to a number of recent developments in the sector.
There is a high number of care homes in the UK, especially in the popular retirement towns of the South East. However, the extra legislation introduced through the Care Standards Act has created the situation where a large proportion of the care homes have been deemed unsuitable or require extensive renovation, and many care home owner/managers will be under-qualified. Consequently, owners have been selling up and many nursing homes have closed and are continuing to close.
This has led to a shortage of beds for elderly residents in the UK which, coupled with a growing demand, means that anybody now going into the sector will almost be guaranteed a thriving business and a steady income.
John Read, a partner of Chandler & Co, specialists in healthcare financing. “The market is improving drastically every day because more and more homes are closing down and nobody is building new homes. Land is at a premium and the cost of building a new one means it’s not practical or economically viable.”
Yet whereas starting from scratch is inadvisable, recent falls in purchase prices means it is now a very good time to buy an existing care home, according to Andrew Long, director of specialist healthcare business brokers, GLP. “Typically a care home business will be valued as a percentage of its yearly profit. This has stayed at around four to five times the annual profit. Interest rates are low so the cost of lending is low, while demand for beds has increased, partly due to the new regulations that have forced some care homes to close down. All this means that the market is healthy at the moment.”
Be warned, however. The numerous regulations concerning staff, training and premises means that potential purchasers must be prepared to make a substantial commitment, both financially and personally, in a care home business.