Surge in investment into care sector in Germany and Sweden

Germany and Sweden have seen the biggest inward investment into care home over the first three quarters of this year, with increases of 21% and 80% respectively, according to the latest research from property advisers Savills.

Of the total investment into the European care sector in the period, Germany accounted for 42% and Sweden 23% of the €3.6bn investment, followed at a distance by Belgium, Finland and the Netherlands. Overall investment in Europe was down 8.1% on the figures last year.

The market is being being spearheaded by the most dynamic of the public specialized REITs, such as Aedifica and Confinimmo, but also very active have been investment managers such as Primonial, Patrizia, Threestones Capital, Capital Bay, and listed companies such as SBB i Norden.

According to Marcus Roberts, head of Europe at Savills Operational Capital Markets, “Despite the current health crisis, the care home sector remains very attractive for investors seeking a secure income as it is backed by solid long-term fundamentals. Based on recent deals transacted and others in the pipeline, we expect the year-end volume to slightly exceed €5bn, in line with last year’s turnover.”

“As the overall investment activity will eventually resume sometime next year, we could witness surprisingly high care home investment volume in 2021. According to the Emerging Trends in Europe 2020 survey, retirement/assisted living is the sector offering the best prospects for investment and the second-best prospects for development.”

Yields are also likely to continue downwards, he believes. “Increased appetite from investors has put downward pressure on yields over the past two years, notably in Sweden, Germany and Finland where prime yields hardened by 30, 20 and 10 basis points respectively. The prime care home yield currently ranges between 3.85% and 5% depending on country, location and quality of assets. We expect growing competition for care home assets will continue to put upward pressure on prices.”

Lydia Brissey, director European Research at Savills in Paris, emphasizes the role demographics will play in the sector: “According to the European Commission, the total population of the EU-27 is projected to increase from 447.7 million at the start of 2020 to peak at 449.3 million by 2026. Meanwhile the age group 65 years or over will rise from 92 million in 2020 to 130 million by 2100. By 2050, they will account for 30 per cent of the total population, up from 20% currently. Those aged 80 years or older, who currently make up 6% of the total European population, will account for 11% in 2050 and 15% in 2100.”

“With many public bodies and institutions looking at the sector and ongoing changes to the care home model, we expect new concepts will continue to emerge from the crisis in the medium term.”