Senior housing, investments down 35% in Europe

Today, Japan has more than 30 per cent of its population over the age of 65. By 2050, 31 countries, many Europeans - Italy in the lead - will be in the same situation. In short, if European demographics decline, demand will push here. Yet senior housing - the asset class by which we define both residential housing for the self-sufficient and healthy elderly and the more traditional nursing homes - is losing ground on the investment front across Europe. Taking stock of the year ended and outlining forecasts for 2024 - at Deloitte's Brussels headquarters - was Shha, the multi-stakeholder platform that brings together operators, investors and managers in the supply chain, in collaboration with Real Asset Media.

According to Savills' data, investment in the sector dropped by 35 per cent in 2023 compared to 2022, from around EUR 7.8 billion to EUR 5.5 billion last year. Practically, almost halved compared to the 9.5 billion in the 'record' year 2021. Specifically, residential care for the independent elderly fell from EUR 3.3 billion to EUR 2.6 billion in 2023 on 2023; nursing homes from EUR 4.5 billion to EUR 2.9 billion.

"By 2024," explained Richard Valentine-Selsey, director, head of European living research at Savills, "investments are expected to slightly exceed the 2023 level, or at least stay at the same level. It will depend on several factors. So far, it has been the cost of money (inflation) that has weighed heavily. Both because it has slowed down the investment capacity of operators and because price increases on materials and construction sites have forced projects to be reduced or stopped.

These are all burdens that can only partly be passed on downstream to end users, who live off their pensions and who, in many European countries, also have to take into account the agreements signed with the various national or local health systems, the health insurance funds. "Moreover, after the first signals," Valentine-Selsey added, "investors are expecting more substantial reductions in interest rates from the ECB. While waiting, they remain cautious and at the window. Finally, there are elections in several countries, which add uncertainty to the picture. In the UK, by far the largest European market for investment in the sector, the possible change of majority, from Conservatives to Labour, has slowed initiatives'.

On the yield front, on the other hand, we are around 5% (5.1% the figure, slightly higher than in Milan, compared to 4.6% in Berlin and 4.1% in Amsterdam). Rising costs - is the widespread opinion among traders - have put pressure on margins and increased insolvency risks. Many revised expansion plans because returns were not competitive.