Dramatic increase in nursing homes needed to meet demand
The Irish nursing home market is facing a significant challenge in which the demand for places exceeds supply while the level of transactions and construction activity both remain subdued, a report into the sector by agents Cushman & Wakefield has concluded.
And with the CSO forecasting that the country's elderly population will grow both in absolute terms and as a proportion of the population, with the number of over-80s increasing from 128,000 in 2011 to 344,000 in 2036, this situation could become even more acute in the absence of a major increase in nursing home accommodation.
An analysis of the stock of private and voluntary nursing home beds contained in Cushman & Wakefield's report shows that there were approximately 23,000 beds provided across 433 nursing homes in Ireland in 2016; 5,867 beds across 89 homes were provided in Dublin, representing 25pc of the national supply.
Marian Finnegan, chief economist at Cushman & Wakefield, warned that most nursing homes were already operating at full capacity.
She said: "The demand for long-term residential care is demonstrated by high occupancy rates in private and voluntary nursing homes across the country, as such demand is exceeding supply. The median average occupancy rate nationally stood at 94pc, which in practical terms, signifies full capacity. It is worth noting that beds in private and voluntary homes account for over 80pc of total long-term nursing home beds in Ireland."
In terms of sales activity in the nursing home market, Finnegan noted this had remained almost entirely driven by off-market transactions during 2016. "Overall, a relatively small number of transactions occurred in the period, with most of the sales taking place outside Dublin. There remains a notable disconnect between the weight of investor interest in the sector and the number of transactions taking place," she said.
The most significant transaction last year was the sale of Laurel Lodge Nursing Home, Templemichael Glebe, Co. Longford. The home accommodating 106 beds, was sold to an Irish company, ACR Healthcare, for about €12m in the third quarter of 2016.
With private and voluntary nursing home operators relying on the State's nursing homes support ('Fair Deal') scheme, which in 2016 provided a rate of €884 per bed, the sector is an uncertain proposition for investors.
Finnegan said: "The low level of the 'Fair Deal' rates, specifically outside Dublin, and the fact that the operators are highly reliant on the income they provide, have a combined effect in discouraging investors entering the sector. The rates are set to only cover the cost of care, with costs associated with capital investments not included".