Significant role of Dutch investors
While international investors were still cautious in 2023, they showed more interest in the healthcare real estate market in the first half of 2024. Nonetheless, Dutch investors accounted for 90% of the transaction volume in the first half of the year. The healthcare real estate market’s focus, with 182 million euros (65% of the transaction volume), is on transactions of private residential care locations. The transaction of the portfolio of Wonen bij September, comprising 11 residential care locations, significantly contributed to this category.
Bouwinvest purchased this portfolio, from the French publicly traded Emeis, which has been selling various real estate portfolios to institutional investors in recent years for financial reasons. Additionally, there was increased activity from private real estate funds in the healthcare real estate market during this period. The purchase of three locations from Domus Valuas by Capitalisers is a good example of this.
More suitable new-build healthcare projects necessary
The share of new-build projects in the transaction volume remained at 35% in the first half of the year, accounting for approximately 400 new rental homes in this segment. In 2023, the healthcare real estate market saw investment in only 1,700 new rental homes for the elderly, while the national annual target is approximately 35,000 homes to meet demand. The expected shortage of suitable homes for the elderly is projected by CBS to exceed 300,000 by 2030.
Insufficient new suitable (or life-cycle proof) homes are being developed. Earlier research by Capital Value shows that only 3% of developers’ planned inventory in the coming years is focused on suitable homes. Developers are hesitant to realize homes for the elderly due to challenges in the new-build sector and a lack of knowledge about suitable housing for the elderly. This is a missed opportunity, as life-cycle proof homes for the elderly require only a few modifications compared to regular homes.
Incentive schemes for market parties
Both the political arena and market parties need to address the shortage of homes for the elderly with more urgency. Enforceable agreements between municipalities, market parties, housing associations, and care institutions may be made through the ‘Regiewet’. The government has already taken steps by providing subsidies, but this is far from enough. Market parties should also be able to use the Incentive Scheme for Healthcare Suitable Housing (In Dutch: Stimuleringsregeling Zorggeschikte Woningen (SZGW)). This subsidy for housing associations and care providers aims to create suitable housing in the social rental sector for people with a care indication who wish to live independently for longer.
Elderly housing outside the scope of impact investing
Dutch and international institutional investors are increasingly prioritizing impact investments. A significant amount of capital is made available for affordable housing for specific target groups, including key workers and middle-income earners. However, based on target group definitions, elderly housing often falls outside the strategy of impact funds for various pension funds. Additionally, for specific healthcare real estate funds, the presence of 24-hour care is often a requirement, which is not applicable for life-cycle proof homes. Finally, life-cycle proof homes often do not fit within regular rental housing funds based on their purpose, target group, or the involvement of a care organization. The risk is that life-cycle proof homes may fall through the cracks, and the stock of this type of elderly housing will not be expanded.
Manon Kuipers, Director of healthcare real estate at Capital Value, states: “It is a positive development that pension funds from home and abroad are making capital available for the housing of specific target groups through impact funds. Investments in healthcare real estate and elderly housing would be an excellent fit within the philosophy of such funds. However, in practice, elderly housing often does not have a place within these funds. It is concerning that the strategies of both housing funds and specific healthcare funds do not fully align with the need for independent elderly housing. The capital from pension funds and investors is crucial to address the increasing shortages. This requires a strategy adjustment so that such homes can be included in multiple funds.”
