The US is facing a demographic bubble of historic proportions as baby boomers age and move into retirement. The proportion of Americans aged over 65 is set to double between now and 20601, and an unprecedented investment in long-term care will need to take place in order to cater for their needs.
The situation is even more stark when it comes to dementia care. As citizens live longer, the number of people diagnosed with Alzheimer’s disease is predicted to balloon, from an estimated 5.7 million today to almost 14 million in 20502. The US already spends US$186 billion caring for those with Alzheimer’s, and that figure will need to quadruple by 20503.
There is currently a massive shortfall in dementia beds across the country, especially in the city centres. Manhattan, for example, has an estimated 70 dedicated memory-care beds servicing a population of almost 1.7 million people.
Senior housing has a number of attributes that make it an attractive defensive asset in an uncertain market. As they are no longer in employment, retirees may be less vulnerable to the income effects of a downturn, and once established are less likely to move, particularly if they have acute health needs. Government support programs for low-income residents, such as Medicaid, can further eliminate risk from the bottom-end of the market during a downturn.
Long-term care in the US has little in the way of supply constraints, and private providers are competing with a relatively low number of competitors who lack a profit motive4. As a result, investing in aged care in the US carries a low level of regulatory risk – the long-term solution is likely to be a straightforward matter of mostly private supply meeting rising demand.
This burgeoning need for long-term care places, and for high needs specialist care in particular, will largely be catered for in the US by the private sector, and Australian investors can capitalise on this growth opportunity through real estate investment trusts (REITs), such as the AMP Capital Global Property Securities Fund, which is an active ETF trading on the Australian Stock Exchange.
1 Population Reference Bureau, Fact sheet: Ageing in the United States, January 2016.
2 Centres for Disease Control and Protection, Alzheimer’s Disease, June 2018.
3 Alzheimer’s Impact Movement, Factsheet: Costs of Alzheimer’s to Medicare and Medicaid, March 2018.
4 Stevenson D.G, Bramson A.B & Grabowski D.C, Nursing Home Ownership Trends and Their Impact on Quality of Care: A Study Using Detailed Ownership Data from Texas, Journal of Aging & Social Policy 2013; 25(1): 30–47
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