The struggle to best provide necessary housing and care options for a changing demographic is not an issue isolated to the United States. For example, the demand for senior housing developments in China is growing at a rapid clip as China’s senior population is increasing. As discussed in a recent Senior Housing News article, theelderly population is currently at 185 million and is projected to increase to 487 million by 2053, according to the China National Committee on Aging. At that time, the elderly will comprise 35% of China’s total population. By comparison, the United States senior population is expected to reach 88.5 million by that time, accounting for 20% of the national population, according to U.S. Census data. The city of Beijing alone experienced a nearly 100% increase in the senior population in the last decade, with the population at 2.5 million. However, the city’s government-funded care homes can only provide beds for 2.8% of its senior population, demonstrating an urgent need for further development.
The elderly in China, similar to most other East Asian societies, are traditionally looked after by their children at home. However, according to a report by the New York Times, for people born in the one-child era after 1980, this could result in caring for two parents and four grandparents all by themselves. Further, today’s Chinese working class is busier than ever, leaving less time to care for family at home. This shift will prove to be an increasing concern as about 22% of the Chinese population will be older than 64 by 2040, up from 9% right now.
This combination of factors represents an enormous opportunity for American developers and investors to branch out into the Asian senior housing market. Until now, senior housing developers have tried to break into the market but met regulatory and cultural obstacles that have thwarted their efforts and progress. Now that the demand and need for senior housing is evidently rising, governmental regulations have started to loosen as the country is trying to prepare itself for the expanding senior population. In January of 2012, China reclassified the health care services sector as “permitted” rather than “restricted,” resulting in overseas companies being able to own 100% of an operation in China.
Mark Spitalnik, American CEO of China Senior Care, took note of the lack of residential care facilities in China during his 15 years in the country. He evaluated the country’s healthcare market in 2006-2007 and discovered that most of the geriatric wards at China’s tertiary hospitals had waiting lists. He found that roughly 95% of the patients in the hospitals did not actually require hospitalization, but they were there because there was not an adequate supply of senior residential options.
While there are several barriers to entry for foreign development, including a complicated land acquisition and construction approval process which can take over a year to complete, the government recently shifted their stance on foreign development after recognizing the growing need for senior housing.
For example, Spitalnik successfully broke into the market with the development of Cypress Garden, a 64-bed residential living facility. The development opened in 2014 in Hangzhou, the largest city of Zhejiang Province of Eastern China. The facility consists of eight households, each housing eight residents. Amenities include private kitchens, a movie theatre, exercise area, and beauty salon.
China Senior Care, along with partner Global Senior Living Properties (GSL), hope to develop senior care communities throughout all of China, and Cypress Garden represents just the beginning. According to GSL CEO Andrew Oksner, interest in this market is mounting from several investor sources. Wealth funds, pension funds, endowments and investment firms are all interested in China’s senior care market, and Oksner is targeting a $50 million capital raise.
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