- Housing and Care for the Elderly Programme
- Number of people waiting for a home with nursing care continues to rise
- Healthcare market under pressure
- Middle rent regulation affects independent care homes
- New Green Deal Healthcare launched
- Transaction volume declines, but remains historically high year-on-year
- Rising initial yields in all healthcare property segments
Housing and Care for the Elderly Programme presented
The Housing and Care for the Elderly Programme was presented in November as the sixth programme of the National Housing and Construction Agenda of the Minister of Housing and Spatial Planning. The programme is also part of Wozo (Housing, Support and Care for the Elderly, see also Investment Update August 2022). Among other things, Ministers De Jonge and Helder want to speed up housing and mobility by building specially for the elderly with sufficient facilities in the neighbourhood. In addition, a living environment that encourages exercise and socialising will help older people to stay fit, happy and independent for longer. Of the 900,000 homes to be built by 2030, about a third will have to be specially designed for older people. According to the programme, this will include about 250,000 zero-step and clustered homes for the elderly and 40,000 clustered nursing homes. The programme is in line with the vision of Zilveren Kruis and Syntrus Achmea that 450,000 additional homes suitable for the elderly will be needed by 2040. The National Housing and Construction Agenda, including the Housing and Care for the Elderly Programme, will be translated into regional agreements, including administrative agreements with provinces and municipalities.
HOUSING AND CARE FOR THE ELDERLY PROGRAMME PRESENTED
Source: Ministry of the Interior and Kingdom Relations (BZK) and Ministry of Health, Welfare and Sport (VWS) (2022)
Number of people waiting for a home with nursing care continues to rise
In the first few months of the fourth quarter, the number of people waiting for a home with care continued to rise to 24,803 (source: National Health Care Institute). Approximately 23 per cent of these people require active or urgent placement. Compared to January 2021, this is an increase of almost 20 per cent. According to Minister Helder, this figure shows that we are reaching our limits in the Netherlands. There are too few places with sufficient staff to meet current and future demand.
This is also the conclusion of Zorgverzekeraars Nederland (umbrella organization of eleven health insurers in The Netherlands), which has analysed the expansion plans of health care institutions in the coming years. This shows that expansion is lagging behind expected demand. For the period up to 2027, 18,920 additional places are planned at long term care providers, while TNO research suggests that a national expansion of 50,000 care places is necessary in the same period. The Housing and Care for the Elderly programme assumes 40,000 places. In both cases, the expansion falls short, and the expansion plans have not yet been implemented. Part of the discrepancy is due to the government's Wozo programme, launched earlier this year, which stipulates that there should be little or no expansion of residential capacity. According to the government, nursing home places will have to be provided extramurally.
WAITING FOR LONG-TERM CARE HOUSING
Source: Zorginstituut Nederland (2023), edited by Syntrus Achmea
Healthcare market under pressure
After earlier alarm bells from health institutions and various health umbrella organisations, health care has now reached a critical point, according to NZa (Dutch Healthcare Authority) and the Health and Youth Inspectorate. The care we are used to is simply no longer possible,' says NZa chief executive Marian Kaljouw. The demand for care is increasing, while the supply is becoming increasingly scarce. There are long waiting lists and a shortage of care workers. People's self-sufficiency is therefore becoming increasingly important. People and their networks need to do as much as possible themselves to make care accessible to everyone. Finance Ideas sees clustered, care-friendly housing as the key to accessible care. In addition to social housing corporations, institutional investors can also be suitable partners to contribute to a sufficient supply of suitable housing for people in need of care.
The social impact that investors can achieve is obvious. Staffing issues and rising costs are leading to expectations of red ink in financial year 2022 for hospital care, disability care and nursing and care for the elderly, among others. Despite this, the number of bankruptcies in the healthcare sector remains minimal. There were no bankruptcies in the nursing sector in the third and fourth quarters. The number of bankruptcies among curative care providers remained fairly stable, while there was a slight increase among wellbeing organizations.
HEALTH CARE BANKRUPTCIES (2-QUARTER MOVING AVERAGE)
Source: CBS (2023), edited by Syntrus Achmea
Middle rent regulation affects independent care homes
In December, Minister of Housing and Spatial Planning De Jonge announced to the House of Representatives more details on the regulation of the middle rent and the amendment of the Housing Valuation System (WWS). According to the proposal, houses with less than 187 points will be regulated, giving them a maximum reasonable rent according to the WWS. In the amended WWS, the WOZ ceiling of 187 points will be removed, outdoor areas will receive more points and a temporary higher rent of 5 per cent will be possible for planned or under-construction projects. Also important are the extra WWS points awarded for sustainable homes (+1 to +10) and a deduction for non-sustainable homes (-1 to -10). The difference between A++++ and G-labelled homes can therefore be a maximum of 20 points. This means a difference of 105 euro between the highest and the lowest energy label. Sustainable care and nursing homes with a higher quality of living can generate higher financial returns for investors, provided that the rent level is in line with the prevailing market rent. Minister De Jonge aims to launch the proposal for consultation in early 2023 and to introduce the regulation from 1 January 2024. For more details on this regulation, see also the Residential market section. As of 1 January 2023, the maximum annual rent allowed to be paid in the rent-free sector will not exceed 4.1 per cent. This has been set by the government on the basis of the CLA wage increase plus 1 per cent. This rent increase also applies to independent care homes rented in the open sector.
New Green Deal Healthcare launched
With a regulatory focus on sustainability (see previous section) and sustainability increasingly reflected in property valuations, more and more stakeholders in the healthcare sector are also focusing on different levels of sustainability. During Climate Week 2022, the new Green Deal 'Working together on sustainable care' was launched on 4 November. On that day, industry associations, health insurers, banks and ministries signed up to this new Green Deal. Since then, more than 150 organisations have joined. The Green Deal stands for care that minimises CO₂ emissions and the impact on the living environment, with an eye on the circularity of raw materials and materials. In this way, the sector is helping to limit the growth in demand for care and to move towards appropriate care. In particular, CO₂ reduction is an important pillar to which real estate investments can contribute.
GREEN DEAL: WORKING TOGETHER FOR SUSTAINABLE CARE
Source: Green Deals
Transaction volume declines, but remains historically high year-on-year
Due to market uncertainties, investment volume in the fourth quarter of 2022 was 325 million euros, below the normally strong final quarter of the year. In the years 2019, 2020 and 2021, the average volume of transactions in the fourth quarter was 468 million euros. There were only 20 transactions in the fourth quarter, compared to 41 in the fourth quarter of last year. Many potential transactions were put on hold or cancelled. The increase in purchaser costs as of 1 January did not boost investment volumes in the fourth quarter. Dutch institutional investors in particular continued to invest in 2022. Listed funds withdrew from the market.
Debt investors were affected by the higher cost of financing and appear to have stopped investing for the time being. Investment in new buildings declined due to limited availability. Despite the negative developments in the fourth quarter, the strong second and third quarters brought the total transaction volume in 2022 to a historically high level of over 1.3 billion euros. We expect the relatively quiet investment market to continue in the first quarter of 2023.
INVESTMENT VOLUME HEALTCARE REAL ESTATE (PER QUARTER, € BILLION)
* data 2015-2018: CBRE, 2019-present: Capital Value
Source: CBRE (2021), Capital Value (2023)
Rising initial yields in all healthcare property segments
Caution in the investment market was reflected in rising gross initial yields in the fourth quarter. Initial yields for primary and secondary care rose by 20-25 basis points in the fourth quarter, following a slight increase in the third quarter. In this segment, foreign and debt-financed parties are more common. Declining investor interest is clearly reflected in rising market yields. Initial yields on care and nursing homes also rose by 15-25 basis points in the fourth quarter. On an annual basis, however, the effect is less significant. Yields have changed by between 0 and 15 basis points year-on-year. Projects that are ‘put on hold’ and later restarted will be bought by investors at higher yields. Higher financing rates and general economic uncertainties will temporarily tighten competition for investors. A further rise in initial yields in the first quarter cannot therefore be ruled out. Nevertheless, the investment characteristics of healthcare real estate, such as high demand, remain attractive.
PRIME GROSS YIELD (INCLUDING BUYERS COSTS, PER SEGMENT)
Source: Capital Value (2023)
The wait-and-see attitude of some investors will continue to characterise the investment market in the coming quarter, which is expected to be relatively quiet. Increased financing costs and spreads over risk-free rates are not yet reflected in the price levels of developers and vendors. Where vendors are willing and able to adapt to current market conditions and investors are willing to participate in a changing investment market with a long-term view, transactions can continue to take place. Due in part to the increased transfer tax and rising interest rates, initial yields are likely to rise slightly rather than stabilise or fall. At the same time, healthcare institutions are facing challenging times to balance costs and revenues. This requires a long-term vision where sustainability and clustered housing projects can contribute to sustainability, efficiency and cost savings objectives.