The Nursing Home Rating Report 2024 underscores the need for significantly more staff
Rising material and personnel costs, along with increased demand for nursing staff and capital, are expected to further strain the German market for nursing homes and healthcare properties this year.
The improvements in the sector, particularly in the COVID years of 2020 and 2021, have now gone into reverse. Several prominent insolvencies in the sector made most of the headlines last year, rather than more positive news.
These findings come from the 'Nursing Home Rating Report 2024,' a collaborative effort by RWI - Leibnitz Institut, hcb Gmbh, Bank im Bistum Essen eG, Curacon GmbH, and Terranus GmbH.
The market volume of outpatient and inpatient care services totalled around €72 billion in 2021. The share of the care market in the overall healthcare market rose from 9.8% in 1997 to 15.2% in 2021, putting nursing care firmly into second place behind hospitals, in terms of importance.
The report highlights how once again, more people in need of care received outpatient care, with a share of 24.4% in 2021. At the same time, the number of people receiving inpatient care fell slightly for the first time in that year.
Trend towards privatisation
The trend towards privatisation has persisted; the proportion of people in care at private facilities rose from 25.4% in 1999 to 39.8% in 2021. In outpatient services, the proportion rose from 35.6% in 1999 to 54.4% in 2021. The number of privately run places has risen by 143% since 1999. However, at 86.2%, the occupancy rate of private homes in 2021 has fallen below the 1999 level of 87.3%.
Privately run homes operate more cost-effectively than public or non-profit homes, particularly in western Germany. Including the share of investment costs, their prices were 6.7% below the western German average, claims the report.
As German society ages, and if care rates remain constant, there are expected to be 5.7 million people in need of care in Germany by 2030, rising to 6.4 million by 2040. This would be an increase of 14 or 28% compared to 2021. At that rate, this would result in an additional need for 322,000 inpatient care places by 2040. The necessary new investments and re-investments would amount to between 81 and 125 billion euros.
The report underscores the need for significantly more staff, projecting an addition of 163,000 to 380,000 inpatient and 97,000 to 183,000 outpatient caregivers by 2040. Of these, between 124,000 and 210,000 will be needed for nursing staff in inpatient and outpatient care by 2040.
Three key trends to note
Anna Maria Martin, senior consultant, ImmoTISS Care
Anna Maria Martin of ImmoTISS Care identifies a 200,000-unit shortfall in residential nursing home units, against an existing supply of 550,000. She puts the supply deficit at a round 2% or a shortage of about 350,000 units, based on the supply ratio of at least 10% of the over-65s looking ahead, the so-called demographic bulge in Germany's top-heavy population. Three key trends will predominate:
First, due to the baby boomers of the 1960s, the number of older people in Germany will increase from 18.4 million to around 23 million by 2050. By then, almost one in three people are expected to be over 65, which will increase the need for care and senior-friendly living space.
Second, with rising life expectancy, Germany's aging population has led to an increased need for care, doubling to 5 million in the last decade. By 2050, it's expected to grow by 40% to over 7 million, requiring more nursing services, despite improved healthcare and lifestyles which are enabling seniors to remain active and independent.
Third, policymakers are favouring outpatient over inpatient care, enhancing its financial attractiveness through the Care Strengthening Acts. This shift has spurred the development of senior housing with barrier-free flats and supplemental care services, akin to inpatient facilities. This trend, coupled with increasing interest from users and investors, highlights significant growth potential in Germany's senior living market, driving the need for more such housing developments.
What sort of investment is needed?
By 2040, inpatient care demand will require €81 to €125 billion in investments, with CBRE and immoTISS estimating a €55 billion need by 2030 for care facilities. These figures stem from both rising demand and outdated infrastructure, compounded by varying state regulations. The German Property Association ZIA is advocating for standardised regulations and refinancing options for nursing home updates. Similarly, the Federal Association of Social Services (bpa) supports realistic occupancy rates and flexible care rate negotiations to enhance care infrastructure.
REFIRE: Still, despite challenges, the consistent need for care places makes healthcare properties a promising investment. The sector's importance and market stability position it as a key asset class for long-term investors, but the issue of staffing needs and cost control are still causing the sector major headaches.
