Knight Frank: UK’s healthcare sector continues to outperform

UK care home occupancy is at the highest level since pre-pandemic times, and average private care home fees have increased by 9% year-on-year as demand exceeds supply, according to Knight Frank’s 2024 Healthcare Trading Performance Report, which was published yesterday.

Julian Evans, Partner & Global Head of Healthcare, KF

“The healthcare sector’s performance has continued to reflect its robust underlying growth fundamentals, with an ageing population creating supply side pressures for good quality single-bed facilities across the UK,” said Julian Evans, partner and global head of healthcare, Knight Frank. “Despite headwinds in recent years, which have led to higher operating costs, quality care homes in areas with the right demographic profile continue to operate with remarkable resilience, given they meet an essential societal requirement.”

Occupancy levels across private care homes in the UK have reached 88%, according to the report, which represents a 2% increase on 2023 and is the highest average occupancy rate since 2019, as structural trends continue to fuel requirements.

Occupancy levels had fallen almost 10% in 2020 to 79%, but the sector is now witnessing a full recovery, having seen steady annualised increases in line with growing demand from an ageing population across all regions. 

“Growing occupancy and property income levels have coincided with inflationary pressures moderating, which means that higher volumes of capital will target opportunities within a sector facing a shortage of quality stock,” said Evans.

KF surveyed 80% of the UK’s corporate care market, which comprises over 100,000 care beds across 781 towns and cities. Higher occupancy levels have seen the average weekly care home fee grow 11% year-on-year – it is currently £1,182 per week. As a result, earnings before interest, taxes, depreciation, amortisation, rent, and management fees across the private care home sector have increased 26% in 2024.

London (14%) saw the highest yearly increase in fees, with the North East (60%) representing the highest proportion of self-funded care residents across the country. Northern Ireland witnessed the highest year-on-year growth out of all UK regions, with occupancy increasing 6.4%, followed by Wales which witnessed a 5% rise across its private care homes. 

Knight Frank’s research found that 63% of residents in private pay or self-funded homes fall within the over-85 age bracket, compared to 46% in local authority homes. This reflects both the general wealth profile of this higher age demographic as well as the specialist acute care required.

The UK’s over-85 population is expected to grow significantly over the next 15 years, from 1.6 million (2.5% of the total population) to 2.6 million (3.5%). Dementia care beds face a particularly acute shortage, with requirements currently outstripping supply by approximately 10%. 

Staffing costs continued to increase, in line with previous years, rising 7%, and the average annual cost per resident currently stands at £35,299. However, improved operating margins have meant that staffing costs as a proportion of overheads per facility have decreased 5.7% year-on-year.  

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