Opportunities for senior housing

Thailand's population is ageing and social patterns are changing, creating a need and opportunity for specialised residential property catering for the elderly market.

According to the World Bank, 11% of Thailand's population was 65 years old or older in 2016, compared to 5% in 1995 and the bank forecasts that by 2040, 17 million Thais or more than a quarter of the population will be over 65.

Not only will a greater percentage of the population be older, but people will live longer.

Traditionally in Thailand, children have taken on the responsibility of looking after parents living in the same home.

Household sizes are declining and urban living patterns are changing, especially in Bangkok where more people are living in small condominium units. With lifestyle changes and burdens in life either from their new family or work, children will not always be able to live together with their aging parents.

This means that the elderly population will need more formally trained caregivers as old age will often affect independence and mobility and there will be a need for specialist housing that will cater for the needs of the elderly.

This has already happened in several aging western countries, with the markets in the US and Australia being the most advanced.

For senior housing, the three key needs are companionship, care and maintenance. Life can be lonely if you lose your spouse or mobility and independence. Many older people will need more care from simple things like cooking and cleaning to more specific medical care. Elderly people need full maintenance of their accommodation.

In the US, CBRE classifies senior housing according to the frailty of residents and the level of healthcare services provided. (continued below)

The US has followed a rental and service model of providing senior housing rather than selling.

There are approximately 22,500 professionally managed senior housing and nursing care communities in the US, with about 2.95 million beds compared to a total population of just under 320 million and the supply is rapidly growing as the population ages.

Other countries have different financial models for similar assisted services; in Australia, the most popular model for retirement villages is the leasehold deferred management fee.

The developer sells a lease often at about a 15% discount to neighbouring non-retirement properties, collects a significant service charge to pay for services and collects a "deferred management fee" which is a capital payment when the owner sells the property. This "deferred management fee" is often called a departure fee, generally at 2% to 2.5% of the purchase price for each year of ownership.

Under some contracts, part of the gain on sale goes to the operator and there can be refurbishment charges on a sale. Often the operator is designated as being the only sales agent for the property.

The need for senior housing is going to grow in Thailand and the need for a high level of service means that a traditional condominium or housing sale structure is unlikely to be appropriate.

Every ageing country could develop in two directions depending on each country's social conditions. One is the US model of rental and service. The other is something more similar to Australia, with an upfront capital payment to acquire a lease, service fees and a capital payment to the operator on exit.