SOME 10,000 new nursing home beds need to become available over the next 10 years – at an average cost of €100,000 a bed – to meet the growing demands of a larger, older population, according to the head of Bank of Ireland’s nursing home financing team.
This represents a €1 billion investment in the sector over the next decade.
Denis Bergin, head of the retail intermediary team in Bank of Ireland’s business banking division which has financed 70 nursing homes since 1992, said demand was “so strong” for nursing home beds that occupancy levels had increased on average to 91.2 per cent from 86 per cent in three years.
The bank has just launched a second €75 million fund to lend to the nursing home sector, just nine months after the creation of a similar-sized tranche of finance. Mr Bergin said there were 20 planning applications for new nursing homes last year with a further 15 applications for extensions and improvements to existing homes.
Citing CSO projections, the bank said there would be 840,000 more people over the age of 65 by 2041. Mr Bergin said 1,000 new nursing home beds would need to become available every year for the next decade to meet the growing demand. He said there would be more 800,000 people over the age of 65 by 2025.
The bank estimates the cost of opening an average-sized nursing home in a rural area at about €5.2 million, compared with €9-€10 million in Dublin. More than 65 per cent of nursing home beds are provided by the private and voluntary sector. Mr Bergin said the average loan to a new nursing home developer was about €5 million but could be as large as €10 million for city-based homes.
“The cost of building a nursing home varies significantly, depending on location,” he said. “If you are building a 60-70 bed nursing home, it is going to cost, on average, €100,000 a bed.”
Mr Bergin said occupancy levels vary around the State from a low of 77 per cent in the north-west, where there are a large number of homes in Sligo and Donegal, to a high of 96 per cent in the northeast. Dublin has occupancy levels of 91-92 per cent.
A nursing home bed costs residents €1,100-€1,300 a week in Dublin, compared with €700- €950 a week in rural areas.
Regulations have changed in recent years, forcing nursing home developers to increase room sizes to at least 135sq ft per room, excluding en-suite facilities. “Obviously, the cost of constructing nursing home beds have gone up significantly,” said Mr Bergin.
Tax incentives on nursing homes have increased from a seven-year period to 10 years and then to 15 years in recent budgets, meaning that if nursing homes fail and the property is turned into an alternative use, such as apartments, then the State can claw back some of the taxes from the investors.
“The attractiveness of a nursing home has diminished as an investment,” said Mr Bergin.
