20 PER cent of Thailand’s population will be over 60 and 14 per cent will be over 65 by 2027, according to the Ministry of Social Development and Human Security.
Since 1992, Thais have not been having enough children to replace the preceding generation. There will be fewer workers being born to support the retirees. This shift will present both opportunities and challenges for the Thai property market.
Households will have to spend more time to look after elderly relatives, but not everyone will have the time to do this. There will be a growing market in services and products to care for the aging population and this includes the property industry.
In some countries such as the US, Australia and New Zealand, as much as 5 per cent of the retired population live in some form a retirement home.
Globally there are a number retirement property operating models ranging from 100 per cent sale to 100 per cent rental/service. There is also a wide range in the level and cost service.
The US has a large and rapidly growing senior housing market and CBRE classifies the type of housing according to the frailty of the residents.
1 Senior Apartments that provide accommodation and facilities for elderly on a rental basis.
2 The next grouping is congregate care with three sub categories.
2.1 Independent Living—developments which are like senior apartments but will have a commercial kitchen, dining room and additional common area facilities.
2.2 Assisted Living—with staff provides medication reminders but do not administer medicine.
2.3 Memory Care Developments—where services are like assisted living with the addition of special behavior /memory care and secured access only.
3 The final category is Nursing Care Homes. 24-hour care is provided with registered nurses administering medical care.
The main difference between a retirement home and a normal property is that retirement homes are designed for people with more limited mobility. There may also be minimum age restrictions for eligible residents. The level of services range from maintenance services inside the units to having a registered nurse to a full care facility like a hospital.
As the level of care provided increases, the most practical operating model is a rental-and-service basis rather than the sale of a property.
In Australia and New Zealand, there is a leasehold purchase model where the owner keeps 70 – 80per cent of the purchase price when they leave the property and it is resold by the operator who keeps the rest including any capital appreciation. This is called the deferred service charge or management fee model. There is a limit on level of care that these communities can provide.
In Thailand, there will be growing demand for facilities to accommodate the aging population. However, we cannot simply copy the model used in other cities. Developers must study the target income group, lifestyle and develop a financial model that works for Thai market.
There will be a limit on the number of people who can afford to pay for such a service even with financial support from their children as there is almost no government support. The demand for service and care as well as accommodation will favor the single owner/operator rental/service model similar to a hospital.
Condominium developers can adjust their design, but it is hard to provide the care component as the condominium common area management revenue model is reliant on the collection of fees from all co-owners and governed by an owners committee. Different owners will require different levels of services at different costs making it challenging for building managers because it would be difficult to get a consensus to increase common area fees to match the needs and expectations of all residents.
We will see over the coming years whether the rental or sale model best matches the needs and budgets of Thailand’s aging population.
Aliwassa Pathnadabutr is Managing Director of CBRE Thailand