View from the Nordics: Senior living is at a turning point

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Many municipalities struggle to fulfil their obligations to provide care beds for the elderly. There is also increasing demand for senior living concepts driven by changing preferences of Nordic seniors, says Riikka Moreau.

For many years, the unique Nordic welfare system has guaranteed elderly in the Nordic countries access to publicly-funded care home beds when it has no longer been possible to stay in their own homes.

Especially in the last 20 years, the Nordic countries have experienced a large increase in the elderly population, and this demographic development is expected to continue. The region currently has approximately 27 million people. In 2050, it is expected that there will be approximately 1.6 million more seniors aged 55+ in the region.

The large increase in the elderly population has led to a structural shortage of care home beds because many municipalities are struggling with limited resources to fill their increasing responsibilities. Extended life span often leads to complex health issues and cognitive problems, which adds to the care need load. This has paved the way for privately operated care homes, working together with the public sector, to fill the gap.

In 2020, total care beds in the Nordic countries amounted to 236,000, of which the vast majority were municipality operated while around a quarter were privately operated.

“Nordic seniors have some of the highest retirement savings in the world. According to OECD, total pension savings in Denmark amount to 209% as a percentage of GDP. In Sweden that figure is 110.1% and in Finland 68.1%.”

Rikka Moreau, Northern Horizon

In Finland and Sweden, privatisation of care operations and care home ownership has gained ground for many years and is backed by municipal payments. In Denmark, however, we have only seen purely private care homes without any public support for the construction phase since 2015. Today, municipalities are increasingly open for discussions on working together with the private sector on care provision.

On a Nordic level, the sector is projected to grow substantially with 8,000+ new beds required annually in the coming decades. Thus, helping to address the structural care home shortage continues to be relevant.

Wealthy retirees

Nordic seniors are wealthy, and they have some of the highest retirement savings in the world. According to OECD, Denmark has the highest private pension savings in the world: total pension savings amount to 209% measured as a percentage of GDP. In Sweden that figure is 110.1% and in Finland 68.1%.

This means that many Nordic seniors have the financial means to pay for solutions that match their individual needs. Increasingly, with a changing mentality more open towards investing own funds in the quality of aged care services, they are selecting modern, high standard care facilities to the extent that those solutions are available.

But with government-backed universal healthcare systems, private concepts are not widespread in the Nordic region.

We are also seeing a potential for hybrid solutions and new concepts that cater to seniors who would like to leave their own home earlier in their life.

Today, many seniors in the Nordics seek a collective environment where social interaction, an active old age and safety play a central role. In Denmark alone, studies show that around 80,000 seniors are interested in moving to senior living communities. By 2040, this number is expected to be 144,000. But there were approximately only 7,000 senior housing community apartments in Denmark in 2018 – a fraction of current and future demand.

We are also seeing an increasing demand for senior housing and care homes in urban environments where local services are available and where there is less risk of manpower shortages.

The social infrastructure aimed at seniors and elderly is at a turning point in the Nordics. The needs of new generations of elderly combined with greater financial freedom among seniors are creating a market opportunity for innovative senior living concepts with a focus on quality of life, active old age, and social health.

Riikka Moreau is fund manager at Northern Horizon, a Nordic-based asset manager with a strategic focus on healthcare