Average Private Care Home Fees Up 9% Year-On-Year Underpinned By A Shortage Of Beds

Occupancy levels across private care homes in the UK have returned to, and in some cases exceeded, the pre-pandemic long-term average to reach 88%, according to Knight Frank’s 2024 Healthcare Trading Performance Report. The figure represents a 2% increase on 2023 and is the highest average occupancy rate since 2019, as structural trends continue to fuel requirements. Occupancy levels fell almost 10% in 2020 to 79% with the sector now having witnessed a full recovery, having seen steady annualised increases in line with growing demand from an ageing population across all regions.

The global property consultancy surveyed 80% of the UK’s corporate care market, which comprises over 100,000 care beds across 781 towns and cities. Higher occupancy levels have seen average weekly care homes fees grow 11% year-on-year and is currently £1,182 per week. As a result, earnings before interest, taxes, depreciation, amortization, rent, and management fees (EBITDARM) across the private care home sector has increased 26% in 2024.

London (14%) saw the highest yearly increase in fees, with the North East (60%) representing the highest proportion of self-funded care residents across the country. Northern Ireland witnessed the highest year-on-year growth out of all UK regions, with occupancy increasing 6.4%, followed by Wales which witnessed a 5% rise across its private care homes.

Knight Frank’s research found that 63% of residents in private pay or self-funded homes fall within the over 85 age bracket, compared to 46% in local authority homes. This reflects both the general wealth profile of this higher age demographic as well as the specialist acute care required. The UK’s over-85 population is expected to grow significantly over the next 15 years, from 1.6 million (2.5% of the total population) to 2.6 million (3.5%). Dementia care beds face a particularly acute shortage, with requirements currently outstripping supply by approximately 10%.

Staffing costs continued to increase, in line with previous years, rising 7% and the average annual cost per resident currently standing at £35,299. However, improved operating margins, evidenced by EBITDARM growth have meant that staffing costs as a proportion of overheads per facility have decreased 5.7% year-on-year. Annual property costs per bed have decreased 1% year-on-year to £3,794, while food costs rose 13% to £2,222.

The bifurcation in performance is evidenced by homes with an ‘inadequate’ CQC rating trading at a margin of 2%, compared to homes with an ‘outstanding’ rating, which trade at a 30% margin. Currently just 5% of homes in the UK have an ‘outstanding’ rating, which is what future investment will increasingly focus on delivering. Homes between 60 to 100 beds were found to be the most profitable, with those facilities operating at margins of around 28%.

Julian Evans, Partner and Global Head of Healthcare at Knight Frank commented:
“The healthcare sector’s performance has continued to reflect its robust underlying growth fundamentals, with an ageing population creating supply side pressures for good quality single-bed facilities across the UK. Growing occupancy and property income levels have coincided with inflationary pressures moderating, which means that higher volumes of capital will target opportunities within a sector facing a shortage of quality stock. Despite headwinds in recent years, which have led to higher operating costs, quality care homes in areas with the right demographic profile continue to operate with remarkable resilience given they meet an essential societal requirement.”