Facilities such as full inpatient care, assisted living, rehabilitation clinics and medical care centers are important and are becoming more and more so due to demographic developments in Germany. But what if you look at the issue from an investment perspective? Is investing in nursing healthcare property also promising for the future?
Already in 2019, the supply of nursing home places only just exceeded demand. In some federal states, there was an almost complete occupancy rate of over 90 percent in fully inpatient nursing homes. But in the long term, the overall number of older people and therefore people in need of care will increase. For this reason, even higher demand is expected in the nursing sector in the future, for which the necessary capacities will have to be created. This makes healthcare a growth market that can prove very profitable for investors.
Stable investment returns and cash flows also make the healthcare sector increasingly attractive to invest in. An investment in a healthcare property is highly sustainable and competitive, with a peak net yield of just under four percent (as of December 2022). Nevertheless, it is important to pay attention to the location of the investment. It is crucial to have a good infrastructure so that medical care and pharmacies are nearby. In addition, importance should be attached to good accessibility for relatives. Most people in need of care live in large metropolitan areas, such as Berlin, Hamburg or the Ruhr region. By comparison, few people in need of care live in rural counties such as Bavaria, Rhineland-Palatinate, Thuringia and Saxony-Anhalt.
If you invest in a care property, you have a low risk of loss of rent. The operator of the facility is responsible for direct tenant contact. You enter into a rent agreement with the operator, which usually runs for 20 to 25 years and secures your full rent, even if the facility is vacant. The insolvency rate in the healthcare market is less than one percent, but it still makes sense to choose an experienced operator for your property. This not only protects you from rent defaults, but also relieves you of most of the administrative burden. This is because you are not responsible for matters such as finding tenants, renovation work, utility bills or the like. (12.1.22)
For more information and detailed insights on the subject, please read our Engel & Völkers Guide to Buying a Care Home (German only).
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