Seniors housing investment in China holds risks

CBRE report suggests that early movers may be able to influence future of the market

PUBLISHED : Wednesday, 29 August, 2012, 12:00am
UPDATED : Wednesday, 29 August, 2012, 2:31am

Investment in homes for the elderly on the mainland is risky at present, but challenges can be mitigated in part by careful planning, says international property consultant CBRE.

In its latest report on housing for the elderly across the border, CBRE said that while the sector offered significant investment potential, private-sector developers faced challenges in identifying commercially viable opportunities.

The report makes recommendations for investing in the vast but undeveloped industry, and being a first-mover is high among priorities.

"The lack of regulations covering the senior housing market in China at present suggests that existing operators and first-movers will be in a strong position to influence regulators to design a system that favours current market layers and practices," the property consultant said.

It also recommends that investors should conduct more thorough market studies on consumer affordability, location preferences and required services, all of which can be adapted to meet cultural characteristics and needs.

For example the concept of creating "multi-generational" communities could be explored so that specialised accommodation for the elderly was integrated into a general residential development as a means of keeping the elderly and their families closer together.

Although the average mainland household size continued to decline, the link between generations remained strong, it said. A third of mainlanders, or 437 million people, are expected to be aged 60 or over by 2050, according to official estimates, up from 12.5 per cent in 2009.

To date, private sector participation in accommodation for seniors has been confined to the upper tier of the market, with the majority of senior care institutions publicly operated.

Among private investors, domestic developers and insurance companies are the most active first movers. Leading domestic developers are building track records developing homes for the elderly, and small developers are attempting to establish a niche in this segment.

Foreign investors are also seeking opportunities, but private equity funds remain hesitant to enter the sector given the limited number of completed projects in which to invest at this stage, CBRE noted.

"Despite the challenges that always exist when entering a new market, interest among investors and operators in the senior housing sector will likely increase, as the demographic shift and high-level policy direction support solid demand in the long term," Ada Choi, CBRE's director of research, Asia Pacific, said.