CHINA’S LUXURY RETIREMENT HOMES A BIG HIT
Investors see opportunities in high-end senior care homes that lure cash-rich retirees
RETIREE William Tang recently decided to swap his life in downtown Shanghai for a luxury elder-care development in the city’s far west, paying US$220,000 to rent a two-bedroom apartment for 15 years.
“It is more like a resort,” Tang said after viewing the Ardor Gardens showroom, which highlights amenities including an indoor swimming pool, yoga rooms, wine tastings and roundthe-clock care.
For a growing number of Chinese and international investors, elder-care developments like Ardor Gardens are becoming irresistible bets. Money is pouring into the sector amid renewed attention on just how quickly China is ageing.
Sydney-based property and infrastructure company Lendlease Corp Ltd., which put US$280 million into Ardor Gardens, is among investors that see the policy environment becoming more favourable as the Chinese government tackles its demographic challenges.
“The market will likely be completely different 10 years from now,” said Lendlease’s China president Ding Hui. “If you wait for 10 years before starting to think of buying land, learning, training up a team and developing a business model, very likely you would have
missed the opportunity.”
According to China’s latest population data, the number of residents aged 60 and above has risen 47 per cent over the past decade to 260 million, more than 18 per cent of its total population. By 2050, it is forecast to nearly double to almost 500 million.
Lendlease is in competition with established domestic players, including blue-chip insurers, private-equity firms and property developers. Dozens of foreign investors have also piled in in recent years, including Singapore’s state-owned Temasek Holdings Pte, United States health-care investment firm Columbia Pacific Management and Fortress Investment Group.
More are looking to join the fray. Chinese investment giant Citic Capital is aiming to build a handful of elder-care projects with partners in major cities over the next few years, said the head of the firm’s real estate division, Stanley Ching. New China Life Insurance Co. just started selling a new 280,000sq m elderly-care complex in a suburb of Beijing — roughly the size of 40 standard soccer fields.
Many of these companies have yet to make money from the senior-care business, but they’re betting that growing demand for such facilities and changing societal norms in China will deliver returns in the longer term.
On the policy side, the government is drafting detailed plans to strengthen the senior care sector, with a focus on expanding basic and affordable services. These include increasing the number of beds at nursing homes, and putting resources into training much-needed professionals.
“China’s high-end senior care market has not entered the phase of high-speed growth, but it has
certainly started,” said Ye Liming, a director at the Shanghai Senior Service Industry Association.
The country’s demographic trajectory is also upending deepset 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 labour migration and urbanisation. 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 three per cent 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 governmentsubsidised 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. Up to June, Lendlease had only managed to fill about a quarter of the first 100 or so apartments at Ardor Gardens that it put on the market about 10 months earlier.