A leading provider of research-based indexes and analytics, has released the annual results of its IPD Annual UK Healthcare Property Index, which show an 11.7% return for healthcare property in the UK for 2017.
Sponsored by Aitchison Raffety, the index measures 1,233 healthcare properties worth GBP 5.9 billion. The returns are calculated from a mix of primary care properties, leased principally to GP Practices and the NHS, and secondary care assets including care homes, specialist treatment centres and hospitals.
Total returns across all UK healthcare property increased to 11.7% over the last 12 months, up from 7.9% in 2016, representing the fourth consecutive year of positive capital growth for the index. The return of 11.7% for 2017 exceeded the five and ten year average annualised returns of 9.0% and 6.7%, respectively.
For the last decade, the healthcare sector, with a total return of 6.7%, has outperformed the UK all property average of 5.8%, even on a risk-adjusted basis.
For the first time in the history of the Index, secondary healthcare outperformed primary healthcare with a total return of 12.1% against 11.5%. At the same time, secondary healthcare had a higher income return of 6.0% and a capital value growth of 5.8%, compared to 5.6% and 5.7% achieved by primary healthcare.
Ken O’Brien, executive director, MSCI, commented, “The index performance shows the healthcare sector as one of the best-performing Real Estate asset classes in the UK during 2017, reflecting both robust capital value growth and relative high-income returns.”
Similar to last year, the best performing primary healthcare region was Scotland, which generated a total return of 12.1% in 2017. The sector ‘Midlands, North and Wales Primary Healthcare’ saw the largest increase in return since 2016 from 9.3% to 11.7%. The segments ‘Rest of South East, South West and Eastern Primary Healthcare,’ ‘London Primary Healthcare’ and ‘Scotland Primary Healthcare’ returned 11.3%, 10.5% and 12.1%, respectively.
Rental growth was modestly positive for all healthcare sectors, with open market rental values rising by 0.9% on average for all healthcare property. However, this is well below the 2.0% rental growth for the overall property market.
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