Property development in the healthcare sector is experiencing significant growth, as governments and the private sector recognise the rising need for more efficient and effective models of care to service medical precincts and suburban areas.
At the same time, investors are increasingly looking for quality healthcare assets due to low interest rates and the long-term, resilient income this sector provides.
Developers and investors are targeting assets in regional and city locations.
There are a large number of stakeholders involved in healthcare property development, all with differing objectives, which makes these projects complex, time intensive and technical.
When it comes to the operating environment, the state-government-run public hospital and health sector is at capacity or beyond. So it’s in the public sector’s interest to pass some of the healthcare load to the private sector.
Private health insurers play a key role. They are incentivised to ensure patients receive high-quality care in a low-cost environment.
The strategic imperative is to reduce the time patients stay in hospital. Within the private sector, property developers and investors want a market-based return on their assets, which are long-term in nature.
Hospital and healthcare facility operators such as Australian Unity and Ramsay Health Care are the other integral stakeholders.
All stakeholders operate in an environment in which the healthcare system is increasingly under pressure as the population ages.
So governments are incentivised to support a healthcare system that takes the pressure of the public system by improving the private system.
The story so far
Investor demand far outstrips the supply of quality assets in healthcare property development, traditionally an inefficient market from a pricing and project delivery perspective.
The universe of health property assets can be divided into primary, secondary, tertiary and quaternary facilities. Primary healthcare real estate, the GP network, is heavily sought-after by high-net-worth investors, often the doctors themselves.
Investors are also hungry to invest in secondary facilities, specialist consulting suites often located within medical precincts that include hospitals.
“The innovation we’re seeing is operators and investors partnering with clinicians, who want to have an ownership interest in the asset that’s created,” Trevor Cooke, chief executive officer of property development and investment firm Commercial and General (C&G), said.
The firm recently delivered the $345-million Calvary Adelaide Hospital and is the driving force behind the landmark $500-million Australian Bragg Centre, Australia’s first proton therapy unit, which is being built in Adelaide.
C&G’s focus is the tertiary sector.
“You have to have a deep understanding of an operator’s requirements to be successful,” Cooke said.
“Designing a hospital, which is a complex piece of infrastructure, is very different from delivering a great office building, which is reasonably commoditised.
“Your success is underpinned by relationships and competencies.
“You have to sit down with the user groups to understand requirements and the overall direction healthcare is taking so you can forecast requirements into the future to create infrastructure that is fit-for-purpose.
“But no two hospitals are the same and they all have core specialties, especially in the private sector.”
Cooke said less than 10 per cent of the $100 billion in healthcare institutional-grade assets that operate in the Australian market are currently securitised; that is, packaged into investible instruments.
In comparison, 90 per cent of retail, office and industrial assets are securitised.
This demonstrates the large opportunity for institutional investors to acquire healthcare assets in the future.
The need for renewal in the healthcare system, underpinned by technological advancements and changes in the delivery of care, are two other dynamics creating movement in the health property development sector.
“Our ability to treat people is advancing substantially,” he said.
“The built form that has traditionally housed those activities is becoming redundant relative to how it needs to perform, relative to the requirements of today’s modern healthcare operator.
“So you have redundant stock and operators motivated to release assets from their balance sheets.
“Post-Covid, government balance sheets are stretched and we’re going to need private sector health care delivery solutions to meet this need.”
Frenchs Forest Hospital in NSW a prime example. It has a public hospital alongside a private hospital operated by Healthscope.
The underlying incentive is to convert people who walk into the public system to the private system.
But this is just one example and there is a range of operating models in this sphere.
Private in practice
A leading investor in this area is Centuria Capital Group, which in 2019 secured a 63 per cent interest in Heathley Limited and rebranded as Centuria Healthcare.
Managing director Andrew Hemming oversees a 14-strong team that runs three investment mandates.
It’s telling that global insurer AXA is involved in two of them. Centuria Healthcare has 52 assets under management, worth about $1 billion.
The assets are held within three development funds, a wholesale open-ended fund and five closed unlisted funds.
Centuria Healthcare Property Fund, launched in August, 2020, has 10 properties worth $219.9 million including day hospitals, short-stay hospitals and medical centres.
Hemming invests in and develops short-stay hospitals and medical centres, with local demographics often determining assets in which to invest.
He scours the market for assets with allied health facilities suitable for suburbs with an ageing population.
“Through property development, we are trying to improve the models of care in the suburbs,” he said.
“Having said that, we still believe health precincts—be they regional or metro locations—are still important and need to be developed.
“Our pipeline reflects both sets of opportunities—large health precincts and smaller hospitals in the suburbs.”
Orange Base Hospital and Orange Private Hospital are good examples.
Located just metres apart, the latter has a 24-hour urgent GP centre, which is able to take the pressure of the public hospital’s emergency department.
“This is an example of the public system working with the private system to balance out queues and get costs out of the system,” he said.
Hemming said Centuria’s strategy is to work closely with operators such as Nexus Hospitals or Medibank.
“Their strong brands and care models have the ability to attract doctors. That translates into insurance contracts, which means the doctors may not need to charge patients out of pocket,” he said.
But finding sites with the appropriate zoning and floor plate is tricky. For instance, hospitals require a floor plate of around 1000sq m, which means all the theatres can be on the same floor.
This creates an efficient patient-doctor journey, so doctors and nurses don’t have to walk too far, leading to fatigue and mistakes, which leads to cost.
“Of course, the hospital environment is a balance between patient-centred care and improved cost efficiencies, but largely the focus on patients to have a better all-round experience is factored into hospital designs,” he said.
“Patients also want to be handled with care and want to be able to see their doctors. All these elements are factored into hospital design.”
It’s also hard to find good opportunities due to heightened competition between developers to identify appropriate sites.
Commenting on the operating environment, George Websdale, Dexus’s head of healthcare partnerships, said there were few groups that are actively investing in large scale health assets, due to the high barriers of entry for healthcare property investors.
“The specialised nature of healthcare assets and the relationships with operators and governments is crucial to unlocking healthcare development opportunities,” he said.
Groups with scale and specialised healthcare capability are placed at a competitive advantage.
It’s interesting that while there is a huge amount of activity trying to whip Australia’s ageing health care system into shape, the end game is actually to get the health profession into homes.
“People want to age and die in their homes as opposed to in hospitals. So the future is about providing health services into homes,” Cooke said.
“We’re looking at how the residential sector is transformed by healthcare into the future and how you future-proof residential to make it enabled for healthcare services.”
Article Source: theurbandeveloper.com
Safe as Brisbane houses
If I had to pick the safest major capital city market to purchase an investment property, I would choose to buy a detached house in Brisbane.
My reasoning is straightforward.
First, Brisbane’s relative cost against Sydney and Melbourne is running near the lowest level in almost 50 years.
Article Source: www.macrobusiness.com.au
Are first home buyers really priced out of the property market?
Some people will kill for a bit of free publicity. The first thing to be murdered is the truth, in the quest for cheap limelight.
In real estate, a perennial favourite among those who seek media profile is the affordability crisis. This is a ripper yarn because it tugs at the tear ducts of all Australians whose hearts bleed for desperate young couples who can’t afford to buy a home.
It’s rubbish, of course, but the truth is always optional in these kinds of storylines.
First, here’s the reality. The past year has been the best time ever to be a first-home buyer in Australia. The level of government assistance has never been higher and the cost of finance has never been lower. And investors have been fence-sitting so first-timers haven’t had a lot of competition.
And young home-buyers have responded in record numbers.
Yet, despite all of that, there are organisations who have managed to construct a scenario where no one can afford to buy or that prospective first-timers have to save for 10 or 12 years to cobble together a deposit for a meagre dwelling.
Here are some recent headlines from mainstream media:-
– “Policy failures see houses become unattainable for young Australians”
– “Australian housing affordability worsens amid fears proposed safe lending laws repeal will lead to debt disaster”
– “Tensions in housing market as affordability worsens”
– “First home buyers take 10 years to save for a deposit”
– “From down payment to dealbreaker: Average house deposit now exceeds 100k”
Those last two screamers are the biggest lies.
How do they concoct such scenarios, at a time when FHBs are out there buying in such large numbers?
Very easily, so as long as you’re not bothered by a conscience. You simply create a formula in which every component is a work a fiction.
Here’s the proposition they put forward:-
– How long does it take the average young couple on typical incomes to save a 20% deposit to buy the median-priced house in Sydney?
It’s difficult to imagine a scenario more distant from the reality of most FHBs across the nation.
Here’s why …
– They stipulate a 20% deposit. Nobody saves a 20% deposit. You don’t need to. You can currently get into a first home with a 5% deposit without having to pay mortgage insurance.
– First-home buyers don’t buy median-priced properties, not in Sydney or anywhere else. They buy in the lower price ranges.
– Why houses? Many young Australians prefer apartments and not just because they’re much cheaper. Why do these fictitious scenarios never insert apartments into the equation?
– Why this focus on our most expensive? Why not Brisbane or Perth or Adelaide?
So here’s a realistic equation to give a true appraisal of the prospects for young buyers: how long does it take to save a 5% deposit to buy a house in the lower price quartiles in Brisbane?
Or how long does it take to save the required deposit to buy an apartment in Adelaide or Perth or Hobart?
Or, given the predominate trend in Australian real estate, how long to save a 5% deposit to buy a house in Orange or Wollongong or the Sunshine Coast or Bendigo or Geelong?
Those are scenarios that equate to the reality faced by most prospective first-home buyers.
But you will never see that equation presented in mainstream media, because it doesn’t serve the desired outcome: a screaming negative headline, with the truth optional.
Article Source: www.urban.com.au
First-home buyers are big budget winners
Help for first-home buyers and single parents to own a home and continuation of an income tax break for low and middle income workers are among key measures that will put more cash in the pockets of Australians following the 2021-22 federal budget.
There is an the increase in the First Home Buyer Super Saver Scheme to a maximum of $50,000, up from $30,000, that can be withdrawn from superannuation to put towards a house deposit. The increase comes into effect on July 1, 2022.
There are annual contribution caps to how much can be made in voluntary contributions that have to be saved in super first, under the scheme, before the money can be withdrawn.
Pension loan scheme
There are changes to the Pension Loan Scheme which allows almost anyone who owns a property and has reached pension age to take out a “reverse mortgage” from the government, where the balance of the loan is repaid when the property is sold.
The scheme pays an income up to an amount that is equal to the maximum age pension.
Under changes that come into effect from July 1, 2022, up to 50 per cent of the maximum annual age pension can be accessed as a lump sum each year. The total amount accessible under the scheme has not changed.
“[The change] is important as it could allow older Australians to access the capital in their home to pay for large, one-off items, such as medical services or home repairs, which they may not otherwise be able to afford,” says Colonial First State general manager Kelly Power.
To help free-up homes for younger families, from July 1, 2022, those aged at least 60 will be able to make a one-off contribution of up to $300,000 per person, or $600,000 per couple, to their super when they sell a home that they have owned for at least 10 years. The qualifying age is currently 65.
Jason Murray, chief of member experience at QSuper, says the downsizer contribution allows retirees to move to more suitable housing as their family size drops and to turn the capital tied up in their home into retirement income.
Family Home Guarantee
The newly introduced Family Home Guarantee (FHG) allows single parents with a maximum annual income of $125,000 to purchase a new or existing home with a minimum deposit of 2 per cent. It is available for property purchases of up to $700,000 in Sydney and $600,000 in Melbourne.
The scheme is limited to 10,000 places over four years; though, if the uptake is strong, the government could well add more places. The scheme starts on July 1.
Eliza Owen, head of research Australia at CoreLogic, says single parent households are largely headed by women, making up about 64 per cent of lone parent and lone-adult households.
“As a result, this policy may contribute toward narrowing the gender wealth gap,” she says.
Andrew Wilson, consultant economist at Archistar, estimates a single parent earning $125,000 using the FHG would be able to borrow about $500,000 at current interest rates to purchase a home.
However, that will still leave them with few options to purchase appropriate family friendly homes in Sydney and Melbourne, where prices are booming, Dr Wilson says.
New Home Guarantee
The government has also extended and renamed a scheme where first-home buyers with a maximum income for couples of $200,000 can purchase a home with a deposit of just 5 per cent.
The price ceilings for the New Home Guarantee are $950,000 in Sydney and $850,000 in Melbourne, with 10,000 places becoming available from July 1 to those seeking to build a new home or purchase a newly built home.
Dr Wilson says the measures to assist first-home buyers are a bit “ho-hum”, given recent rocketing property prices. “They are narrowly targeted and are unlikely to significantly stem an ongoing decline in activity from first-home buyers”, Dr Wilson says.
“Increasing activity from investors and rising property prices are likely to see first-home buyer activity fall by 20 per cent next year, and that is assuming full uptake of the schemes announced in the budget”, he says.
Tax relief will be extended for another year from July 1, in the form of retention of the Low and Middle Income Tax Offset. It is worth a maximum of $1080 for individuals and $2160 for couples, with the main benefits going to those earning between $48,000 and $90,000 a year.
The budget confirmed the current $10,560 cap on the childcare subsidy will be removed.
Families with two or more children aged 5 and under will receive an increase of up to 30 percentage points in the subsidy for their second and later children up to a maximum of 95 per cent of fees paid.
Article Source: www.brisbanetimes.com.au
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