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Reasons why it is worth investing in the UK care home market

• How the government helps provide
• Britain's ageing population and underfunding
• Number of people with Dementia
• Government care to people with Dementia
• How investors make direct investments
• The risks
• The Luxury Sector

How does the UK government help provide for the cost of care in the UK

At the moment, if a person living in the UK has the need for Nursing Care and they have less than £23,250 worth of personal assets, the government will cover the full cost of care. This applies to care for the elderly infirm and specialist dementia care. There is a means test whereby some level of contribution will be made towards care for those who have less than £118,000. In a way, as an investment class, the UK care home sector provides a level of certainty of income because the rich can afford to pay – will pay – and the government subsidises those who cannot.

Britain's ageing population and underfunding

Britain’s population is ageing and the government does not have the resources available to provide care for them. In 2018 central government gave local authorities £21.3bn for social care, less than the £22bn it gave in 2011. The ageing population has only exacerbated the funding issues. According to the Office for National Statistics, in 2016 18% of the population was aged 65 and over and in some regions as many as one in three people were over the age of 65. With regards to future demand, according to The Lancet more than one million more people aged 65 and over will need round-the-clock care by 2035, which is a rise of over a third.

A budget shortfall has meant that the government is more reliant than ever on private companies, who are willing to bridge the gap as there is a sustained demand for beds. Whilst Boris Johnson has pledged to invest more money in the social care sector, going off records of previous government’s investment suggests this isn’t likely to materialise. Under the Conservative government, spending on adult social care in England has fallen by 3% since 2009/10 according to the Institute for Government.

Even if the cash injection is delivered as promised, many are in double whether it will go far to remedy the situation. Think Tank the King’s Fund described the social care funding boost as “the bare minimum needed to patch up services for another year”, suggesting it is just papering over the cracks of a much deeper problem.

The number of people with dementia

Number of UK patients with recorded diagnosis of dementia increases by 62 per cent over seven years between 2007-14 (according to the Health and Social Care Information Centre). They need specialist 24-hour care with qualified nurses.

Is the government looking after people with dementia?

The National Health Service in the UK has been reducing capital and seeking out private partners to develop and manage care homes. Virgin Care entered the market in 2010, and over the past six years has been awarded contracts worth more than £1billion and runs over 200 NHS services. So private companies are developing and managing the care homes. The government will pay the bills – where the people can’t afford to.

How investors can make direct investments in this sector?

One can purchase a UK care home suite in a luxury retirement home for over 65’s or a nursing home catering for dementia patients. In both instances the care home operator will lease the property back from the investor at net yields of up to 10% per annum. The care home operator essentially runs their business from the premises and rents property from the investor on a long lease of 10 years.

‘High yielding, hands off investments like care homes and student accommodation investments have been very popular with overseas investors because they are fully-managed and pay regular income’ says investment director, Arran Kerkvliet, at One Touch Property; a specialist property broker in London that sources well-researched property developments for global investors seeking to diversify their income.

What are the risks

Nursing care, qualified nurse shortage. Inflation and minimum wages driving costs up. This is why those leases are only 8% Net.

The luxury care sector

Luxury care homes typically attract more self-paying residents, due to the higher weekly rentals. Luxury care homes are aimed at 65+ year olds who wish to downsize and move into a community environment. They provide an assisted living environment where residents still maintain a degree of independence, but are given help with personal care and have opportunities to attend social events such as wine tastings, social games and nature walks. There is a strong demand for suites in luxury care homes in the affluent parts of the South West of England, such as Somerset, where twenty-six per cent (26%) of the population are over 65 years of age. Tom Morgan, a senior director for CBRE comments that staying in a care home has “become more of a lifestyle choice. People choose them for the mental stimulation and sociable environment”.

With a typical unit costing under £150,000, this type of commercial property investment bypasses stamp duty fees, and investors can make a healthy 10% contracted return per annum – much higher than returns achieved from putting the money in a savings account (typically around 1%). Retirees who sell their homes can trial living in a retirement home and avoid paying stamp duty if they make a subsequent purchase within three years. This affords them enough time to see if they like the retirement living environment or whether they wish to purchase accommodation elsewhere. Investors can also choose to rent out the unit for a set period and then decide whether they want to live in the unit or use the rental income to live in another development. If they choose to sell their house and downsize to a retirement property, they can gift money to their children and grandchildren, limiting the amount of inheritance tax they’d have to pay otherwise.

Many luxury retirement home investments restrict the sale to over 65s only on a lifetime lease basis. The benefits of the luxury care investment opportunities One Touch offer are that they can be sold to owner-occupiers or investors alike. This opens a wider pool for resales, and allows for better capital uplift. Also, lifetime leases cannot be passed on to a beneficiary so if the occupant dies within 5 years the investment is returned to the company with no benefit to the remaining family’s inheritance and at a far greater cost. Conversely, the fixed-term nature of the leasehold that accompanies investments offered by One Touch can be passed onto other family members should the owner pass away before the leasehold is up.

In short, retirement property investments give individuals a lot of flexibility to choose what they want to do with their wealth, and at the very least they let them choose whether they are suited to living in a retirement home environment.

The opportunity to invest in luxury care homes and purchase a studio in a luxury retirement village is proving to be a lucrative one, as Berkley have reported that they make £30,000 profit per bed, and £2million in profit per care home. Weekly fees have increased in some instances by over 50%, driven by the lack of beds in luxury care homes. Investors have recognised the high returns that can be made, and appetite for high-end care homes with self-paying residents is surging. Knight Frank cites £10bn of overseas equity that is set for investment in the sector, attracted by the stable income stream and the “hands-off” nature of the investment. Start a conversation to explore how investing in care home rooms could work out for you

What makes Manchester a good place to buy property in?

Over recent years, Manchester has experienced vast amounts of regeneration that has increased its appeal amongst young professionals across the UK. Coupled with the number of businesses that have set up offices in the city, it is no wonder that young professionals have moved and the demand for property has soared.

According to Cushman and Wakefield, over the last seven years property prices in Manchester have increased by a staggering 34%, which is 4% above the national average. Whilst that’s already impressive, prices are forecasted to increase even further. Over the next five years, prices are expected to increase by 17.1% - the highest of any UK city - as supply struggles to keep up with demand. These figures are promising if you are aiming to buy in Manchester with the intention of achieving capital growth. Read on to find out which factors drive property prices in Manchester, and where you should consider buying Manchester property to achieve your financial goals.

1. Manchester’s Growing Population
2. Manchester’s Affordability
3. Manchester’s Flourishing Business Sector
4. Whereto buy property in Manchester?

Manchester Growing Population

More people are making the move to Manchester from London. The number of people moving from London to the Midlands or the North has tripled over the last ten years, and latest figures suggest that 10,200 people left London for Manchester. People are not just making the move from London to Manchester, but from everywhere in the UK and beyond to Manchester. According to the 2011 census, Manchester is the third fastest growing area in the UK with the greatest percentage of growth outside of London.

Manchester Affordability

There are many reasons why people are making the move. Average weekly wages are indeed lower, according to Centre for Cities, the average weekly wage in London is £751.40, compared to £525.60 in Manchester. However, living costs are modest in Manchester vs. London. According to home.co.uk, average rents in London are a staggering £2,788 pcm, compared to £1,141 pcm in Manchester. Wages are not as dissimilar, so it is understandable that people would want to live somewhere with lower living costs, where they have a bit of extra money in their pocket at the end of the month. Regeneration and business relocation also mean that people often have access to the same jobs, especially in broadcasting and technology, where Manchester was voted the best city to work in.

Flourishing Business Sector in Manchester

In recent years, Manchester has welcomed national and international businesses. Google, Amazon, and Microsoft have all opened offices in the city. Just outside in Greater Manchester, the MediaCityUK business park in Salford Quays is now home to broadcasting companies such as ITV Granada and the BBC.

The relocation of businesses to Manchester might seem insignificant to a property investor, until you discover the knock-on effects. Young professionals chasing employment opportunities will need accommodation in the city, which will impact the demand for rental properties. This allows investors to achieve high rents and when the time is right to sell the property on, capital uplift.

Where to buy property in Manchester?

Manchester is a diverse city, offering many different neighbourhoods with different characters. Whilst the Northern Quarter is renowned for its bohemian, artistic vibe, Salford in Greater Manchester is characterised by modern high-rise apartment blocks and polished streets. Where you invest in Manchester will depend on the type of tenant you want to attract. With regards to property investment, some areas are more promising than others. Regeneration in some areas has impacted property prices so much that they have hit a ceiling, with little scope for improvement. Other neighbourhoods do not hit the criteria for property investment, whether it is because their location in relation to the city centre is not appealing enough, or there is no regeneration in the pipeline. Here are some places we think you should consider if you want to purchase

Buy to Let Manchester

• M14 post code
• Salford
• Regent Road
• St John’s
• Northern Quarter
• Castlefield

M14 post code

Covering Fallowfield, Moss Side and Rusholme, property investment in Manchester’s M14 post code offers some of the highest yields in the country. Average property prices stand at £194,733 and rents average £1,636, meaning that up to a 10% rental yield can be achieved.

M14 borders the main University of Manchester campus, which means lots of students choose to live in the area. Regeneration and an influx of students usually goes together. About £400m of private and public money has been poured into Moss Side to improve housing. Former Manchester City F.C. Maine Road site is also undergoing redevelopment as houses, shared ownership flats, a primary school and healthcare centre.

Salford

Salford located to the West of Manchester’s city centre, which is just a five-minute walk away. Not only does it occupy a convenient location, it has also undergone a huge amount of regeneration that has attracted national corporations. MediaCityUK is based in Salford Quays. It is a 200-acre mixed-use development that is home to the BBC, ITV Grenada, and the University of Salford’s media teaching department. There has already been significant house price growth in Salford Quays since the redevelopment of MediaCityUK started in 2007.

With such high-profile tenants, it is understandable that young professionals want to live in the area close to work. In fact, outside of the city of Manchester it experienced the second biggest increase in population locally. Between 1991 and 2019 the population grew by 12.1%. Prices are still modest with an average of £194,478, although that was up 13% since 2019 according to Rightmove.

Salford is bridging the gap between Salford Quays and Manchester City-centre. The main artillery Road is Chapel Street, which has seen quite a bit of development over the years as the apartment being built were tenanted by a fair number of students as it is near Salford University.

In recent times, The Green Quarter has catered more toward young professionals with developments like The Crescent which has large communal areas and even a swimming pool. Purchase prices start from £219,000 for a one-bedroom apartment and one could achieve rental income of between £905 - £1,900. This is the equivalent of a rental yield of between 5.8% to 6.9%.

Regent Road

Still in Salford and just minutes from Manchester’s city centre is Regent Road. Regent Road acts as a main transitionary route between the city of Manchester and Salford. Developers are starting to take advantage of its ideal location and excellent transport links. New developments on the road include Carnaby Place, a luxury residential development that aims to encapsulate city centre living. Features will include a gymnasium, a concierge service and secure residential parking. Another development in progress is Regent Plaza. Regent Plaza will consist of 525-apartments split over four blocks. The development of Regent Plaza is tipped to be an excellent buy to let property set to “change the skyline” of Manchester - it will include podium level gardens, a resident’s lounge, and gym.

St John’s

Led by Allied London, the old Granada Studios site will be redeveloped into a mixed-use space. Situated by the River Irwell, it occupies a good central London by Spinningfields. St. John’s focusses on Enterprise, Culture and Living. It will aim to bring around more workspaces, creative hubs, and residential developments. Focal points of the St. John’s development include Factory – a new cultural arts venue, Manchester Goods Yard – a workspace building aiming to attract Britain’s most creative businesses, and Nickel & Dime, a new two-tower residential development where tenants can manage their living space through technology. The development of St. John’s will attract new creative residents looking for residence that matched their lifestyle.

Along the River Irwell just outside of the St Johns area is a new development called Downtown. Downtown is a “hotel-style” residential development comprising 368 one, two, and three-bedroom apartments. Unique features of Downtown include hot and cold storerooms to keep supermarket deliveries, a postal room, and a business centre.

Downtown will comprise six towers, ranging in height from 4 storeys to 14. One-bedroom apartments start from £146,297 and a yield of up to 7% is achievable.

Northern Quarter

Located centrally between Piccadilly and Ancoats, the Northern Quarter is considered Manchester’s “bohemian” hotspot. In recent years it has experienced vast regeneration and is home to music venues and craft beer pubs.

NOMA is an £800m mixed use development in the Northern Quarter that opened in 2013. It is the largest development project in the North West, ahead of Salford’s MediaCityUK. Its focus was to regenerate the northern part of the city that had been overlooked in the past. NOMA consists of several components. One is the development of Hotel Indigo, a 14-storey, £26 million ciricular hotel on Corporation Street. Other aspects to NOMA include Hanover Building, a Grade II listed building to be renovated into retail and business space, re-purposing Federation House to host digital businesses, and a new public square.

The Press is a residential development just a 5-minute walk from the NOMA development. The Press is a conversion of a Grade II listed building which was a former printing room. The unique features contribute to its appeal. Each apartment within the development will feature 18th Century details, completed by understated modern fixtures and fittings.

The Press will comprise 66 one, two, and three-bedroom townhouses. Prices start from £196,000 on a 250-year leasehold. Depending on the size of the apartment purchased and number of bedrooms, monthly rental income between £1100 - £2,300 can be achieved, the equivalent of a 5% - 6.5% rental yield.

Castlefield

Castlefield is another area that over the past 20-30 years has experienced significant regeneration. It is a former industrial area and offers attractive period style housing and canal side property. Castlefield has been redeveloped into an exciting mix of waterside apartments, restaurants, and high-tech industries. In 2019, plans were put forward to demolish the remaining dilapidated flats and replace them with 188 new homes. Play space, parks and open spaces will also be included within the plans.

Property prices in Castlefield are on the more expensive side compared to other areas we have mentioned. The average price is £252,136, but it is up 15% on the previous year according to Rightmove. Castlefield has experienced some of the most regeneration in Manchester, and more is in the pipeline. Attractive housing combined with an attractive location will ensure property is always in demand in the area, especially if buyers are working for the tech industries in the area and are on higher salaries. Combined with further regeneration plans, prices are only more likely to increase, especially if they are presented to the target market.

Manchester has undergone a significant amount of regeneration and there is still more in the pipeline. Although property in some pockets of the city have shot up in recent years, there is still opportunity to be had if investors choose areas still undergoing regeneration or property close to regeneration zones. Property near the NOMA and St. John’s development will benefit from capital uplift, and prices in Salford are still low enough that significant gains can be achieved after further development.

Castlefield has proven itself to be one of the most desirable areas to live in Manchester when considering property price increases, and as it now accommodates high-tech industries, more employees on above-average wages will be looking to live there. Combined with continued regeneration, we predict prices will only increase.

Regent Road is a main artillery road that until recently has been overlooked for regeneration. It is likely benefitting from the overspill of Salford and surrounding areas. With its ideal location and the promise of Regent Plaza changing the skyline, it will only become a more desirable place to live.

Highest rental yield areas of Manchester

M14 has some of the lowest average property prices on our list, but the rental yields to be achieved are phenomenal. Being so close to the University of Manchester, we predict rental yields are buoyed by student demand. M14 is one of the best areas to buy investment property in Manchester due to the high yield and stong demand.

Manchester is one of the UK’s most exciting cities and more people are recognising its appeal. It is one of the fastest growing places in the UK which lends itself to property investment as there will be consistent demand. If you are convinced that you want to invest in Manchester, contact one of our investment consultants who will be able to assist you with your property search.

If you are still not sure whether Manchester is for you, why not download our buy to let investment guide to learn more about what you should look for in a buy to let property, or read our best places to invest guide to discover other places we think are worth considering.

Best areas for Liverpool student accommodation investment

Liverpool is home to several universities and has a large student population. Many investors choose to buy student property in Liverpool, but some areas fare better than others.

1. L1-Liverpool City Centre
2. L3-The Knowledge Quarter
3. L5-Everton
4. L8-Baltic Triangle and surrounds

With low property prices and a high number of students, it is unsurprising that Liverpool is a popular city for investors looking at student property. Properties in some postcodes fare better than others, so we are pinpointing the best area to invest in student property in Liverpool.

When considering student accommodation investments, individuals must examine different credentials than what they would it they were investing in traditional buy to let. Whilst many invest in a traditional buy to let to achieve good capital growth, people invest in student accommodation in areas of high demand to achieve high rental yields. This is often why student property in Liverpool is popular with investors, but some properties work out as better investments than others depending on where they are situated.

There are many new student developments under construction. Around Lime Street Unite are building an enormous development that when completed in 2020, will accommodate over 1,000 students. Meanwhile just down the road, Ion is undertaking a redevelopment of an 11-storey building that will complete shortly. Unite are also building a 776-bed St Luke’s scheme under the Bombed Out Church. In the past three years over 5,800 bed spaces have been created in Liverpool.

However, there is also a lot of existing student accommodation stock in Liverpool. In 2017 according to Savills’ Student Spotlight report, there were 21,700 existing PBSA units in the city which equates to 2.1 students per unit.

With additional units either under construction or granted planning permission, this ratio is set to reduce to 1.4 students per unit. This will have potentially damning effects on any potential rental growth as competition is reduced.

Before even considering a development or area, investors should either acquire good knowledge of Liverpool as a city, or work with a property investment company such as One Touch Property, who will research the area and its demographic. It is important to select developments in areas close to university campuses, because this is where students want to be living. Students don’t want to spend time and money travelling to lectures and seminars – they want to roll out of bed and step straight into the classroom.

It is also worth considering the quality of the build, the price of a unit in a development, and the weekly rent. Students are becoming increasingly discerning tenants; they want good quality accommodation at a good price. Students aren’t willing to spend £200 per week on a studio that is furnished to a poor standard, regardless of location. Whilst you want to ensure the unit you are investing in is of quality build, you want to ensure it is modestly priced so that you, as an investor, achieve a decent yield.

Postcodes to Consider Investing in Student Property in Liverpool for High Yields

L1 - Liverpool City Centre

Features: L1 covers much of Liverpool’s city centre, including Liverpool One and Liverpool Lime Street.

Investment Credentials: Property prices in this postcode have been soaring, indicating an increasing desire to live in this area, and there has been plenty of regeneration such as that of Liverpool One, and more in store, such as New Chinatown at Tribeca Fields.

Student accommodation in this postcode not only benefits from being close to restaurants, bars, transport links and shopping centres such as Liverpool One; but L1 is also within easy reach of many university campuses.

Generally, the more central you are the higher the demand for property. Due to the demand of living in such a prime location, properties can command higher rents, which makes property investment here more sustainable in the medium term.

L1 is also the postcode to consider if you wish to sell at a profit. The average property price between 2011 – 2014 was £85,000, but between 2014 – 2015 this shot up to £120,000.

Developments: Sir Thomas House is situated on Sir Thomas Street, right in the heart of L1. Units in Sir Thomas start from £75,000, and an 8.4% rental return is guaranteed for two years. It has recently been converted into serviced accommodation which lowers the competition further. L1 is a central area and typically a tourist hotspot. Owning serviced accommodation in the area maximises the chances that it will be occupied. Also, short term lets tend to command higher prices, so there is more possibility for greater rental yields.

Typical weekly rent in the L1 postcode for a studio is between £120 – £150

L3- The Knowledge Quarter

Features: Many of Liverpool’s university campuses are in L3, including Liverpool John Moores University, the University of Liverpool and The School of Tropical Medicine. It covers much of the renovated Docklands area, and almost forms an outer ring around Liverpool’s city centre and L1 postcode.

Investment Credentials: L3 is popular with students because many of the university campuses are based in L3, meaning that they can have an easy commute to lectures and seminars.

Developments: Devon House student property is an investment within the L3 postcode. Apartments start from a modest £67,950 and promises an 8% net yield for three years.

Typical weekly rent for a studio in the L3 postcode is between: £115 – £170

L5- Everton

Features: L5 covers the Vauxhall and Everton area of Liverpool.

Investment Credentials: It is currently receiving significant investment, such as the £150 million regeneration of Great Homer Street, dubbed as Project Jennifer. The regeneration scheme aims to bring new shops, a new supermarket, improved public spaces and new homes to the area. This will have a positive social and economic impact, and help to improve the environment. With these continuous improvements, property in L5 is becoming more and more desirable.

Developments: Phoenix Place is a student property for sale in Everton. The development situated in the L5 postcode, within walking distance of Liverpool’s city centre. Units in Phoenix Place come fully furnished, and promises a 9% yield for five years.

Typical weekly rent for a studio in the L5 postcode is between: £80 – £135

L8 – Baltic Triangle and surrounds

Features: L8 covers parts of Liverpool such as Toxteth, Dingle and parts of the Georgian Quarter, and lies just to the south of the city centre. It’s a lively area, with an emerging arts scene as a Liverpool-based arts project won the Turner prize in 2015 for its work in regenerating terraced housing in the Toxteth area. It’s also the birthplace of The Beatles, and the area plays homage to that fact.

Investment Credentials: There has been significant regeneration in L8, with many Victorian houses being demolished in favour of new developments. The Welsh Streets, a series of Victorian terraces near Prince’s Park, and birthplace of Beatle member Ringo Starr are in the process of being refurbished which will in turn make the area more appealing.

Currently, property prices are lower than in other central Liverpool postcodes such as L1 and L3. Yet regeneration is bound to push up prices in the area.

Developments: The Steel is a student property in Liverpool L8, that offers 8% net income assurance and is close to both the University of Liverpool campuses and Liverpool John Moores University. The development is completed and already fully tenanted, and units can be purchased from £47,588.

The typical weekly rent in the L8 postcode for a studio apartment is around: £70 – £120

Supply vs Demand for Liverpool Student Accommodation

It is understandable that the increased supply vs demand could stunt rental growth as there is reduced competition. However, that is to assume that the existing student accommodation stock in Liverpool will still be fit for purpose – which is not always the case. For example, Worthington Group announced in 2018 that it was going to convert North Western Hall on Lime Street back into a hotel due to the significant changes it would have to undergo to bring it up to the standard of new student accommodation offerings in the city.

Universities in Liverpool only provide beds for around 16% of their students, so there are clearly many students in Liverpool requiring quality accommodation. Not only that, but with the increased tendency to choose central locations, city centre properties are predicted to perform better than HMOs in the suburbs.

Another option that is on course for the 2020/21 student intake is Borden Court. The development comprises 119 single rooms and all amenities such as communal kitchens, dining rooms, store rooms, wash rooms and laundry facilities. The ground floor has been converted into a large shopping centre which boasts high end shops, homeware stores and eateries. This student accommodation investment in central Liverpool is completed, which means that there is not any development risk and investors can earn income immediately. It is located in the L3 post code of Liverpool – approximately equidistant between the city centre and the Knowledge Quarter where many of Liverpool’s universities have campuses. The convenient location makes it ideal for those wanting an easy commute to lectures and who also want to enjoy Liverpool’s nightlife offerings.

The continued appeal of Liverpool student accommodation for students and as an investment is dependent on proximity, quality of finish, management company and additional services provided.

In conclusion, although there are significant developments of student accommodation in the pipeline in Liverpool, older stock is either being repurposed or is in the suburbs where it is less convenient for students to get to lectures and return home after a night out. The repurposing of old student stock should rebalance supply and demand, and newly built city centre student apartments will always have the edge over HMOs in the suburbs. Liverpool student property investments can still be lucrative, providing investors are savvy and research the demand in the area. Start your property search today to get the most out of this attractive opportunity