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June 12, 2024

Why Invest in the Healthcare Property Market: An Overview

Melbourne Regional & Development Group | Property Development

Australia's healthcare sector is a pivotal component of its economy, constituting 8% of GDP and employing 16%of the workforce. The government plans to incrementally increase per capita health spending by 2.0% annually over the next three decades, underpinning significant sector growth. This makes healthcare property an attractive option for investors seeking stable returns and portfolio diversification.

Key Drivers of Growth

Demographic trends, such as population growth and an aging population, are key drivers of investment in Australia's healthcare property sector. By 2050, Australia's population is projected to reach 36 million, with a notable increase in the elderly demographic requiring extensive healthcare services. Currently, individuals aged over 65 account for roughly 40% of government health spending, despite constituting only 16% of the population. This demographic shift highlights a growing demand for healthcare facilities nationwide.

Resilience and Stability

Healthcare property investments offer stability due to the sector's non-cyclical nature. Unlike industries susceptible to economic downturns, healthcare services exhibit consistent demand driven by essential medical needs. The sector has experienced negative growth in less than 19% of quarters, showcasing its resilience compared to more cyclical industries like mining and construction, which report contractions in approximately 35% of quarters.

Benefits of Healthcare Property Investment

Investments in healthcare properties offer several advantages, including long lease terms, stable rental yields, and potential for capital appreciation. Properties such as medical research centres, clinics, and aged care facilities typically feature extended lease agreements with secure tenants, ensuring reliable income streams. The sector's substantial government funding, which was estimated at $105 billion for2022-2023, further enhances its favourable fundamentals.

Future Outlook and Opportunities

The healthcare property sector in Australia is poised for steady growth, supported by ongoing investments in infrastructure and demographic shifts. With a projected compound annual growth rate (CAGR) of 3.2% from 2017 to 2024, the sector presents opportunities for income and capital gains, making it an appealing option for investors seeking to diversify their portfolios with stable, long-term assets

Investing in Australia's healthcare property sector offers compelling opportunities amidst demographic changes, increasing healthcare demand, and strong government support. Investors can leverage the sector's resilience and growth potential through vehicles like unlisted healthcare property funds to achieve portfolio diversification and steady income.

Disclaimer: All investment strategies and investments carry the risk of loss. This content is not intended as investment advice and does not constitute an offer or solicitation to recommend or suggest any investment product. MRDG advises seeking independent financial advice from a qualified financial adviser that considers your individual financial goals and circumstances.