“China’s high-end senior care market has not entered the phase of high-speed growth, but it has certainly gotten started,” said Ye Liming, a director at the Shanghai Senior Service Industry Association.
The country’s demographic trajectory is also upending deep-set traditions that have impeded the popularity of care homes. Though children in China have long been bound by the duty to care for their elderly parents, many families live far apart following years of labor migration and urbanization. The problem is exacerbated by the fact that many soon to enter retirement only have one child to rely on due to China’s one-child policy, which was eased in 2016.
Despite these demographic shifts, industry estimates predict that only around 3% of Chinese seniors are willing or are able to afford the sorts of services that Lendlease is offering. The vast majority are expected to stay at home or at government-subsidized nursing homes. Though that’s still a large enough number given China’s massive elderly population, the low figure does signify a difficulty for investors.
As of July, Lendlease had filled about half of the first 100 or so apartments at Ardor Gardens that it began marketing last September. Official sales began in December.
In a recent report, consulting firm Qianzhan Industry Research Institute noted that the occupancy rate of private elderly homes, mostly located in wealthy areas such as the Yangtze River Delta, is hovering at 37%-48%, far below the 85% they need to break even. Customers are deterred in part by the cost, due to high land prices and the absence of a real estate investment trust market -- a key long-term funding channel for elder-care property investors in developed markets like North America, Europe and Japan.
Lendlease’s Ding believes that getting dozens of seniors to part with their money for a rental property in Ardor Gardens is significant, given the pandemic. More notable, he thinks, is that the mentality that seniors should spend their savings on owning a property in order to pass it down to the next generation -- rather than on their own leisure -- could finally be starting to shift.
To that end, Tang, who is in his 70s and anticipates moving in to Ardor Gardens in September, is the sort of retiree that investors are banking on -- cash-rich, open-minded, and looking to have fun in their twilight years.
“Our purpose is not to just spend money buying a property,” said Tang. “It’s for a more exciting second life.”
This article was provided by Bloomberg News.