For High Net Worth Individuals (HNWIs) seeking to safeguard and grow their wealth, astute investment decisions are paramount. Portfolio values can fluctuate with market shifts, while management fees and tax implications can diminish long-term returns. Navigating intricate regulations further complicates wealth management.

As of February 2025, UK HNWI economic confidence has shown signs of prudence, registering at 48% 1. This climate underscores the necessity for dependable, robust assets. Healthcare real estate is increasingly recognised as a compelling asset class, offering defensive qualities, appealing yields, and a hedge against inflation.

This article examines why healthcare property is becoming a cornerstone in discerning UK HNW portfolios.

The Defensive Nature of Healthcare Real Estate

Amidst softened economic confidence among UK HNWIs, the allure of resilient investment strategies has intensified. The Saltus Wealth Index Report from February 2025 highlighted a confidence dip to 48% 1, emphasising the importance of assets that maintain steady performance even during broader economic uncertainties.

Healthcare real estate distinguishes itself through its essential nature and consistent demand, irrespective of economic cycles.

Several factors underpin this inherent stability:

• Essential Services: Healthcare is a fundamental societal need, ensuring perpetual demand for facilities.
• Demographic Trends: The UK’s aging population is a significant driver, escalating the need for healthcare services and facilities.
• Long-Term Leases: Healthcare properties typically operate under extended leases, providing predictable and reliable income streams.

These elements establish healthcare real estate as a robust asset class, particularly attractive during economic flux. Unlike sectors susceptible to economic shifts, healthcare real estate offers consistent performance, providing a secure option for HNWIs prioritising capital preservation.

Superior Yield Performance

In the current landscape of moderate yields, the quest for income-generating assets is crucial. Healthcare real estate investments, notably through Single Asset Funds (SAFs), demonstrate robust yield performance.

Compared to traditional fixed income investments yielding approximately 2-3%, healthcare real estate investments via SAFs can offer markedly higher returns while maintaining a strong security profile. For example, while facing some short-term challenges, First REIT is projected to offer a distribution yield of 9.2% for FY25E 2, illustrating the income potential within healthcare-focused property.

This yield advantage is driven by:

• Distribution Growth: Healthcare REITs often exhibit strong distribution growth, reflecting solid income generation.
• Consistent Demand: The essential nature of healthcare underpins stable rental income.
• Inflation-Linked Upsides: Many leases incorporate inflation-linked rent reviews, further enhancing yield over time.

This yield advantage is particularly compelling when contrasted with broader property investments, where UK average asking prices have seen a more modest 1.4% increase 3. For HNW investors, healthcare SAFs present a compelling avenue to secure dependable and superior income streams.

In fact, yields for new, purpose-designed primary care premises with robust lease terms typically range between 4.25% and 5.25%.

Inflation Protection Mechanisms

Inflation remains a persistent concern, eroding the real value of investments. Healthcare real estate offers a robust defence against these pressures. Long-term leases in this sector often include built-in inflation escalation clauses, ensuring income streams keep pace with rising costs.

Moreover, the essential nature of healthcare services enables operators to effectively manage increased expenses, evidenced by a 9.5% increase in Scottish care home fees due to rising operational costs 4.

Key inflation protection features include:

• Inflation-Indexed Income: Leases are specifically structured to mitigate inflationary pressures.
• Essential Service Pricing: Healthcare operators can adjust fees to reflect rising costs, maintaining profitability.
• Preserving Real Value: Healthcare real estate helps maintain the real value of investment returns, safeguarding purchasing power.

For HNW portfolios focused on wealth preservation, this inflation protection is invaluable. Healthcare property investments can effectively maintain and grow purchasing power, even amidst fluctuating inflation rates.

Strategic Growth in UK Care Homes

The UK care home sector presents substantial growth opportunities, fuelled by demographic trends and a rising need for high-quality care facilities. Investments like the £6.6 million funding for Arlington Grove, a luxury care home in Bristol 5, underscore the sector’s expansion and increasing recognition as a viable commercial real estate asset class.

This funding, secured from HSBC UK, demonstrates institutional confidence in the care home market. Consider a recent SIRE Capital Partners healthcare investment in the South East. This purpose-built medical facility, secured on a 25-year lease to an established healthcare provider with RPI-linked rent reviews, delivered an initial yield of 6.8% with projected annual growth of 3.5%, while maintaining capital value stability during recent market fluctuations.

Growth drivers in this sector include:

• Demographic Shifts: An aging population is the primary catalyst, significantly increasing demand for care facilities.
• Institutional Capital: Major financial institutions are actively investing in care home developments, recognising their potential.
• Dual Return Potential: Investments offer both commercial viability and positive social impact by addressing critical care needs.

For HNW investors, care homes represent a strategic growth area within healthcare real estate. These investments can deliver attractive financial returns while also contributing to addressing essential societal needs.

Projections indicate a substantial increase in demand for specialist care facilities in the UK over the next five years, driven by the growing elderly population and government initiatives to support the sector. The average occupancy rate for private care homes in the UK has returned to pre-pandemic levels, reaching 88% as of December 2024, further highlighting sector recovery and growth.

Tax Efficiency Strategies

Taxation is an increasing concern for UK HNWIs, with 83% anticipating further tax increases on capital gains, income, and inheritance within the next year 1. This concern is now paramount for 47% of HNWIs, up from 22% just six months prior 1, highlighting the critical importance of tax-efficient investment strategies.

Healthcare real estate, particularly when structured through Single Asset Funds (SAFs), can offer notable tax advantages. SIREs’ streamlined investment process facilitates efficient capital deployment while maintaining rigorous due diligence, addressing the often lengthy onboarding processes associated with traditional property investments.

Tax efficiency benefits can include:

• Inheritance Tax Considerations: SAFs and specific structuring may qualify for Business Property Relief (BPR), potentially mitigating inheritance tax liabilities. BPR is a UK tax relief designed to reduce inheritance tax on transfers of business property, including certain types of commercial real estate.
• Income Tax Optimisation: SAFs can be structured to enhance income tax efficiency, maximising net returns.
• Capital Gains Tax Planning: Strategic structuring allows for optimised capital gains tax outcomes, preserving wealth across generations.

SIRE Capital Partners specialises in Single Asset Funds designed to maximise tax efficiency for HNW investors, aligning investment strategies closely with wealth preservation objectives. These structures are specifically tailored to potentially mitigate inheritance tax and optimise income streams, addressing key financial concerns for HNWIs.

SAFs are designed to navigate evolving tax landscapes, offering compliant and efficient investment vehicles, particularly relevant given recent adjustments to UK tax regulations.