In a significant development, the UK saw a historic number of care homes change ownership last year, largely driven by investors from the United States who are attracted to one of the few property sectors where rental rates are expected to rise.

According to data released by Cushman & Wakefield, the cumulative transactions in the UK care home sector reached an impressive £3.1 billion, marking a record high.

Tom Robinson, who leads the healthcare division at Cushman & Wakefield, noted that the consistent demand for care homes stems from a demographic trend that shows no signs of reversing. He emphasized that there is no imminent government intervention that could significantly alter the market landscape.

Robinson remarked, “This is a longstanding trend rather than a fleeting one; unlike certain novelty businesses, the need for care homes is enduring.”

He compared the care home sector favorably to traditional property markets that are facing more considerable challenges, such as retail, which is impacted by online shopping, and offices, which may be affected by the rise of remote work.

While rental growth has slowed across various property sectors recently, care homes managed to increase their fees by about 8.5% last year, as estimated by Cushman & Wakefield.

Many of the record-breaking care home transactions in 2024 were significantly influenced by the sale of Care UK, a prominent chain, from Bridgepoint, a private equity firm, to Welltower, a US-based real estate firm that specializes in the care home industry.

Welltower had previously entered into a refinancing agreement with HC-One, the largest operator of care homes in the UK, in 2021, securing additional investment to enhance its financial stability during the pandemic.

The surge in care home transactions last year coincided with growing challenges facing the social care sector and escalating demands for government reform.

James Tugendhat, CEO of HC-One, expressed concerns in November regarding the potential impact of a £25 billion national insurance hike, which could compel some care home operators to consider selling and further diminish market capacity.

In an announcement this month, the Labour government revealed that Baroness Casey of Blackstock will spearhead an independent commission focused on reforming adult social care, with its final report not expected until 2028, leading to renewed calls for expedited reforms.

Last year, American investors played a prominent role in the UK care home market, representing 56% of all transactions.

Robinson stated, “While US investors have always participated in this market, their activity last year was notably aggressive. They possessed the financial resources that other UK and European investors struggled to access as funding costs rose.”

William Laing, chairman of LaingBuisson, a health and social care data intelligence firm, mentioned that much of the foreign investment targeting UK care homes is focused in London and the southeast, where many pensioners are selling higher-value properties to support their care needs.