While nursing homes in Ireland have been in the media recently for all the wrong reasons, nursing home investment has been in investors’ cross hairs for a number of years.

The nursing home sector in Ireland is attractive because of the unique demographics prevailing in the Irish Market.

Our population is growing but ageing. The 2016 Census of Population shows our average age is 37.4 years, an increase of 1.3 years since 2011.

 The numbers over 65 are up 19.1% – an increase of 102,000.

Worryingly, the age group that pays for it all [25 – 64] increased by just 47,400.

The over 65 group is projected to grow to 1.4 million by 2046.

Those over age 80, who are most likely to be in residential care, will grow to over 470,000, an increase of 378%.

In October 2017, the ESRI projected the demand for long term and intermediate care places in nursing homes will increase by 45% to 54% by 2030 – an extra 15,000 beds.

Currently there are 24,000 private, public and voluntary beds in 438 nursing homes with an occupancy rate of 94%. Over the past 5 years, 20 homes have closed with the loss of 535 beds.

Despite the demand for places and an undersupply of beds, investment in the sector has slowed down.

The Health Information and Quality Authority [HIQA] is increasing Regulation and imposing higher standards. In order to meet those higher standards, development costs now run at €120,000 – €160,000 per nursing home bed.

A new 60 bed unit will cost between €7.2 million and €10 million to build,

Staff costs are rising and an older age at entry means patients are more dependent.

The National Treatment Purchase Fund [NTPF] is aggressively negotiating lower Fair Deal rates with Private Nursing Homes. The average payment is now €974 per resident, per week.

HSE figures for 2019 show public nursing homes were paid €1,615 per resident, per week.

The low level of Fair Deal rates, especially outside Dublin, and the fact operators are highly reliant on the income it provides, have a combined effect in discouraging investors from entering the sector. The rates are set to only cover the cost of care, with costs associated with capital investments not included.