Apart from investment in London, investment in prime properties is offering lucrative returns. Despite Brexit and increase in taxes, the properties bought by international buyers in central London are dominating the property markets in the UK, where foreign buyers were responsible for making more than half of the essential purchases in Q2 2017. Currently, the housing sector in the UK is dominated by private landlords, social landlords, developers, housing association and authorities. The healthcare sector offers flexible multi-operational asset class where an extreme shortage of care units has led to a rise in rents. Undersupply of health care units raises the need to increase the private supply of houses. In Central London, only 3,178 beds and 20,357 retirement housing properties are available, which can satisfy only 10 per cent demand of the growing ageing population.
Residential property value is two-timed greater than the cost of commercial property, and it stands at £5.9 trillion (as per the data represented by Property Industry Alliance 2017). Online mortgage broker Trussle finds the price of a house has risen from £2,006 to £211,000 (i.e. 106 times) since the England team won World Cup (1966), but the salaries have increased one- third from £798 to £26,500. Commercial property accounts for 13 per cent – with a value of £883 billion. These non-residential properties include healthcare, hospitals, colleges, schools and other institutions, which are a fraction of total properties but have a significant function in the property market.
Opportunities in healthcare properties
Investment increased in the first half year of 2018 in the UK healthcare sector where the CBRE reports find the investment volumes increased to £687 million from £492 million in 2017 and £400m reported in 2016. The care home sector will remain robust in the coming years, and the performance of such properties was 12 per cent in 2017.
The healthcare rental market is growing where new purpose-built healthcare units, opportunities funds, and institutional investors are spending on health care. It remains believed that these primary care units can provide safe value for money.
Health care industry received an investment of more than £1.32bn in 2017 that is 88 per cent more than the 10-year average. The healthcare industry requires a consistent flow of finance to fulfil the requirement of people. The critical drivers of the healthcare industry are the ageing population, shortage of care bed and long-dated income.
The investment in the healthcare sector attracts foreign investors due to long-dated income where the lease-term can be of 30 years, while, the average lease for commercial properties is seven years.
REITs and some leading property companies invested up to £741m (in 2017) in healthcare and UK institutions spent £214m. Recently, The UK based investors Primary Health Properties (PHP) bought the Mountmellick Primary Healthcare Centre (located in Co Laois) as part of the growth in the Republic of Ireland where the requirement for primary health care infrastructure is increasing and secured rental income can be earned through government-backed long terms.
Research on care homes finds there is a substantial opportunity in this sector. The challenges in the industry are rising property price and increasing living costs.
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