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UK Commercial Care Homes VS Malaysian property

The returns from investing in the UK commercial care homes sector are undoubtedly attractive. But, beyond that, what this particular investment extends, above other investments, is the fulfilment of having played a part in providing care for those who need it.

Investor interest in the UK healthcare market reached historic highs this year.

By the end of May, investment volumes had hit £687bn – significantly higher than the £492bn invested in the same period last year and the £417bn reported in 2016.

Notable transactions in the first quarter of 2018 alone include Triple Point Social Housing REIT’s investment in supported housing worth more than £40m and Impact Healthcare REIT’s sale-and-leaseback deal on three purpose-built care homes operated by Prestige Care Group for £17m.

Healthcare investments in the UK from 2008 to 2018-to-date (Graphic: Propertyweek.com)

Healthcare is becoming an increasingly popular sector for investors. Results from CBRE’s recent EMEA Investor Survey show that healthcare is one of the most popular subsectors of the alternatives market, with large numbers of investors looking to get into the sector.

This is reflected in increased demand: in spite of healthcare staffing challenges arising from Brexit and a social care funding crisis, occupancy rates for UK care homes rose for the fifth consecutive year. Demand for the sector is now at its highest level in over 20 years, translating to a record volume of about £12bn healthcare deals in 2017, reports Knight Frank. It is anticipated that investment volumes in healthcare real estate will continue to grow thanks to strong investor demand for this sort of long-dated, fixed-income stock.

CBRE reports that the key factor underpinning the potential for future growth in the UK’s healthcare real estate sector is the need to accommodate the mounting care needs of the British aging population.

And, these needs are real, especially if one looks at the estimated shortfall of 148,777 market standard beds by 2021 coupled with 6,600 care homes at risk of closure over the next five years. Currently, 85% of care home stock in the UK is over 40 years old with half of the existing 480,000 care home beds not fit for purpose.

CBRE projects over-85s in Britain to grow by 50% to 2.28m in 2026, quadrupling to make up a total of 8.8% of the UK’s population by 2081.

Projection of UK elderly population growth to 2081 (Graphic: CBRE)

Dementia is a growing concern among the elderly as well, with a pressing need for specialist care to give sufferers an adequate standard of living. In the absence of a cure, the overall number of people in the UK with diagnosable dementia will treble to over 2.5 million by 2081.

In the care home sector alone, this growth will result in the need for an additional 200,000 specialist dementia beds over the next 25-30 years, representing an increase of 40% on current numbers.

Knight Frank Head of Healthcare, Julian Evans, said that investment was needed in the current market with demand outstripping supply.

He stressed that the care home sector was facing a “national crisis” of undersupply with 5,000 beds brought to the market last year and 7,000 beds being decommissioned.

Virata Thaivasigamony of property consultancy CSI Prop echoed the findings from CBRE’s Investor Survey, saying that there has been good response among Malaysian investors towards UK care homes.

“Our last few launches sold out quickly, but we are introducing more projects from this segment to meet the high demand that we have seen among Malaysian investors.”

But for him, there is more to the investment than monetary gains.

“What the elderly care homes investment extends to the investor — above other investments — is the fulfilment of having done something for the good of others. Yes, it is undoubtedly a profitable venture, but it is also an investment that adds value to society and truly makes a difference.

“Caring for the elderly and infirm, especially those with dementia, is not akin to caring for an elderly but, otherwise, relatively healthy mother or relative at home. It requires specialised care. It is enabling the elderly to have dignity in the last few years of life, providing them with the care that their children, family member and friends cannot provide for them,” Virata said.

UK Care Homes Vs Malaysian Property

There is good reason for the high investor demand. The comparison of investment yields below shows that UK care homes offer much higher returns compared to local residential property, with the added benefit of an easy exit:

Rental yields for a UK Care Home vs a Klang Valley Apartment. Note: Klang Valley prices and rental returns are estimates based on current market conditions.

At the moment, residential property in Malaysia is showing lacklustre demand among investors. The glut of unsold housing indicates that the local market is currently on a downward trend, which is driving investors to search of better returns elsewhere.

The number of unsold completed residential units for the first quarter of 2018 totalled 34,532 units, worth RM22.26bil, the National Property Information Centre reported in June.

This represents a 55.72% increase from the 22,175 unsold units last year.

In ringgit values, this represents a rise of 67.82% from last year’s RM13.27 bil.

What are your thoughts about the investors flocking to the Care Homes sector in the UK? Drop us a comment below. If you are interested to jump on the Care Homes bandwagon with the potential for high returns, don’t hesitate to give us a call at 3163 8343 (Singapore), 03-2162 2260 (Malaysia), or email us at info@csiprop.com!

By Ian Choong

Sources:

  • https://www.propertyweek.com/analysis-and-data/uk-healthcare-investment-volumes-show-strong-growth/5097120.article
  • http://www.carehomeprofessional.com/exclusive-investor-interest-uk-care-home-market-historic-high-says-knight-frank/
  • https://www.thestar.com.my/business/business-news/2018/06/28/unsold-residential-soho-units-at-rm22bil/#qvbDmpmyyufsX23G.99
  • https://www.cbre.com/research-reports/United-Kingdom-Healthcare-Property-Trends-May-2018
  • http://valuedinsights.cbre.co.uk/the-property-perspective-alternatives-h1-2018
  • http://www.knightfrank.co.uk/resources/healthcare-property-spring-market-overview-2018-spring-2018-5204.pdf
  • Featured image from cygnet.care
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Malaysian Property Market to Decline in 2018

Despite positive economic growth, the year 2017 saw Malaysia struggling to shrug off a severely weakened currency, international infamy due to the 1MDB scandal, and a declining property market.

While the ringgit has rallied, bursting through the start of 2018 at a high, the outlook continues to look bleak for the local property sector.

The Malaysian Reserve reports that high- and low-end properties are not expected to see any immediate rebound as affordability, excess stock, and economic and political concerns cast a dark shadow on what was once a vibrant sector.

That there is a glut in the market is now a clear understatement. Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years!

The total unsold units in Napic’s findings include overhang (completed, but unsold) units, unsold under construction units, as well as SoHo (small office/home office) units and serviced apartments.

Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years! Source: Napic; Image credit: http://bit.ly/2CtnTIm

83% of the unsold units constitutes the above-RM250,000 category and 61% of the total unsold units comprise high-rise properties, of which 89% were priced above RM250,000. The value of unsold and unutilised properties comes to an estimated RM35.5 billion.

And, with the impending general elections, consumers are exercising more caution in big-ticket long-term purchases.

Affin Hwang Investment Bank Bhd analyst Loong Chee Wei told The Malaysian Reserve that the property market is far from seeing any recovery due to the rising cost of living and the disconnect between society’s income and affordability level.

Local property investors looking to gain from property appreciation and hefty returns from the sale of properties, need to manage expectations as this year looks to be a buyers market (and a renters market). Property sales will not be as attractive as it used to be.

More’s the pity, then, given the rosy Malaysian economic outlook for 2018 and the steady ringgit growth. Public Investment Bank Bhd’s research arm reports that Malaysia is slated to become the second fastest growing economy in Asean.

Total unsold residential properties by state in Malaysia as of 1Q 2017. Source: Napic; Image credit: Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in 10 years! Source: Napic; Image credit: http://bit.ly/2CtnTIm

With the local property market at an uncertainty, some investors bide their time and jump at the opportunity to invest when the price is right (e.g. offered at fire sale prices), and then hold until the property market cycle goes into an upward trend, before they sell for a profit. 

Others diversify their investments into high-yielding, growing markets overseas, such as Australia and the UK, where the currency is stronger, hence rental returns and appreciation are at a higher value than the ringgit. 

Unlike Malaysia, these countries are facing critical undersupply in housing  due to population growth as a result of migration, jobs creation and educational opportunities.

“The UK and Australia have strong growth potential. The population and its demand for housing have grown faster than supply, causing property prices to keep appreciating. It is also because of this, that there is a strong rental market,” says property expert Virata Thaivasigamony of CSI Prop.

“With the current and forecasted performance of the ringgit, alongside the weakened pound and Australian dollar, investors now have the opportunity to invest from a position of strength. Diversifying investments is key to hedging against uncertainties both locally and globally.”

CSI Prop proudly promotes international investment property with high yields at low risk. Our portfolio comprises residential and purpose-built student property in cities across the United Kingdom (London, Luton, Manchester, Liverpool, Newcastle, York, Glasgow, Scotland; Sheffield, etc); Australia (Melbourne, Perth, Brisbane) and Thailand (Bangkok). Our projects are concentrated in high-growth areas with great educational, infrastructural and job growth potentials. We aspire to make a difference in the lives of our clients by helping them achieve their investment goals through strong market research backed by third party experts and due diligence. 

Disclaimer: CSI Prop does not provide tax & legal advice and accepts no liability. Readers are encouraged to consult a qualified tax or legal advisor for a thorough review.

Need advice or clarification? Call us for more information and/or to find out about our projects! Hotline: 03-2162 2260