A New Way To Invest In Commercial Property
Discover the benefits of pooling resources to access institutional- grade property in a Single Asset Fund.
The escalating cost of care home fees in the United Kingdom has become a pressing concern for high net worth individuals and families. This dramatic rise presents both challenges and opportunities for sophisticated investors seeking to protect their wealth while planning for potential future care needs.
As care costs continue to outpace general inflation, high net worth individuals are increasingly exploring alternative investment strategies that can provide both competitive returns and potential hedges against future care expenses. This article examines how healthcare-focused Single Asset Funds (SAFs) compare to traditional property investments in addressing these dual objectives.
The surge in care home fees represents a fundamental shift in the UK care market. According to LaingBuisson’s “Care Homes for Older People” report, the average weekly fee for a residential care home bed increased by 19% from 2021/22 to 2023/24, reaching £949. Similarly, nursing home fees rose by 18% to £1,267 over the same period [1]. This dramatic escalation far exceeds general inflation rates, creating significant financial pressure on families planning for long-term care.
The financial strain is further compounded by additional market pressures. Carterwood’s 2024 Self-funded Fee and Trading Performance Review highlights that self-funded nursing care fees averaged £1,567 per week, marking a 7.1% increase, while personal care fees averaged £1,200 per week, up by 9.2% [2]. These increases reflect the ongoing operational pressures facing care providers, including rising staff costs and regulatory compliance requirements.
For high net worth individuals, these market dynamics create a compelling case for exploring alternative investment vehicles that can potentially address both wealth preservation and future care cost management. Traditional property investments often lack inflation-protection mechanisms, creating vulnerability to diminishing real returns as care costs outpace general inflation.
The housing market challenges compound these concerns. According to the Chartered Institute of Housing, high housing costs, poor quality homes, and lack of affordability are major drags on household living standards and economic mobility [3]. Their analysis suggests that housing wealth accumulation by higher-income households has exacerbated inequality, creating intergenerational and regional disparities that directly impact care provision costs.
“The healthcare sector’s performance has continued to reflect its robust underlying growth fundamentals, with an ageing population creating supply side pressures for good quality single-bed facilities across the UK.”
When evaluating healthcare property investments, high net worth individuals typically consider two primary vehicles: publicly traded Healthcare Real Estate Investment Trusts (REITs) and Single Asset Funds (SAFs). Each offers distinct advantages and considerations in terms of yield, risk profile, and management requirements.
Healthcare REITs provide exposure to diversified portfolios of healthcare properties with the benefit of liquidity through public markets. For example, NorthWest Healthcare Properties REIT pays a monthly distribution of $0.03 per unit, which works out to about $0.36 per year, giving it a yield of approximately 7.55% [4]. This demonstrates the competitive yield potential available in the healthcare property sector.
However, REITs face challenges with debt levels and rising interest costs that illustrate the potential advantages of SAFs. SAFs offer greater transparency and control over specific healthcare assets without the broader portfolio risks inherent in REITs. While SAFs typically require larger minimum investments and longer holding periods, they eliminate the volatility associated with publicly traded securities.
The operational complexity of healthcare SAFs contributes to their higher yield potential but also introduces specific management challenges. These include:
The healthcare property sector faces significant capital investment challenges. The NHS Confederation has highlighted that decades of underinvestment have left the NHS with a £14 billion maintenance backlog and insufficient resources to modernize its estate, equipment and technology [5]. This underinvestment creates opportunities for private capital to fill the gap, with at least £3.3 billion of extra investment needed each year.
One of the most compelling advantages of healthcare property investments through SAFs is their superior inflation protection compared to traditional property investments. This protection stems from the structure of government-backed healthcare leases, which typically incorporate robust inflation-linking mechanisms.
The UK Government’s Market Sustainability and Improvement Fund Provider Fee Reporting for 2023 to 2024 reveals the extent of fee increases in the sector. Average fees for care homes without nursing for clients aged 65 and over increased by 10.1% to £804 per week, while care homes with nursing saw fees rise by 9.6% to £937 per week [6]. These increases demonstrate the inflation-linked nature of healthcare revenues, which directly benefits property investors with appropriate lease structures.
Grant Thornton’s analysis highlights the ongoing inflationary pressures, noting that local authorities increased average fee rates by up to 8% in 2023, which did not fully offset the 10% increase in the National Living Wage in April 2024 [7]. This dynamic creates ongoing pressure for fee increases, benefiting healthcare property investors with inflation-linked leases.
Government-backed healthcare leases often include specific inflation protection mechanisms such as:
While traditional commercial property can generate attractive returns, the inflation protection mechanisms are often less robust. For instance, Palace Capital, a regional commercial property REIT, has recently reported profits from £35 million of asset sales in the 2024-25 financial year, achieving an average premium of 6% to book value [8]. However, these modest premiums lack the systematic inflation protection inherent in healthcare properties with government-backed leases.
"The expenses associated with long-term care services are increasing between 3 – 5% per year on average." - LTC News
Beyond yield and inflation protection, healthcare property investments through SAFs offer significant diversification benefits within a high net worth portfolio. The defensive characteristics of healthcare real estate stem from its low correlation with traditional asset classes and its resilience during economic downturns.
Recent market analysis suggests that investors concerned about high valuations and potential sharp drawdowns in conventional equity schemes are increasingly considering more defensive investment strategies. Similar to how equity savings funds offer slightly higher returns than fixed income with lower volatility than pure equity, healthcare property investments through SAFs can provide stable returns with reduced correlation to broader market movements [9].
This defensive positioning becomes particularly valuable during periods of economic uncertainty. Healthcare properties have demonstrated resilience through various economic cycles, including the recent pandemic, where the sector has shown strong recovery. The essential nature of healthcare services ensures consistent demand regardless of economic conditions.
For high net worth individuals concerned about preserving wealth while generating income, the defensive characteristics of healthcare SAFs can complement traditional property investments, creating a more resilient overall portfolio. Benefits include:
Christie & Co’s Care Market Review 2024 indicates that 40% of operators in England and Scotland, and 67% in Wales, plan to expand their portfolios, reflecting confidence in the healthcare property market despite economic uncertainties [10]. This operator confidence translates into stable tenant demand for healthcare properties.
The tax environment for high net worth individuals in the UK has undergone significant changes, most notably with the announced elimination of the non-domiciled tax regime by April 2025. This change, expected to raise between £2.6 and £3.4 billion annually, represents a fundamental shift in the tax environment for many wealthy individuals and families [11].
For those remaining in the UK, the comparative tax efficiency of healthcare SAFs versus traditional property investments becomes increasingly important. Several key tax considerations differentiate these investment approaches:
Stamp Duty Land Tax (SDLT): Both investment types incur SDLT on purchase, but healthcare properties may benefit from different rate structures depending on their classification.
Value Added Tax (VAT): Healthcare services are generally exempt from VAT, potentially creating tax advantages for certain healthcare property investments compared to commercial or residential properties.
Income Tax Treatment: Rental income from both traditional property and healthcare SAFs is subject to income tax. However, the structure of SAFs may offer opportunities for more efficient income distribution, particularly when held within appropriate vehicles.
For HNWIs affected by the abolition of non-dom status, specific investment structures can optimize tax efficiency for healthcare property investments. These include:
The elimination of the non-dom tax status makes tax-efficient investment structures more important than ever for high net worth individuals. Healthcare SAFs may offer specific advantages when structured to optimize for the new tax environment while providing inflation-protected income that can offset rising care costs.
Beyond immediate investment returns and tax considerations, healthcare SAFs offer unique advantages when integrated into comprehensive estate planning and succession strategies. By investing in the healthcare property sector, high net worth individuals can potentially address both wealth preservation and future care needs within a single strategic framework.
This approach aligns with broader trends in high net worth estate planning. A recent survey revealed that 77% of high net worth individuals plan to increase their investment in UK property, with an average additional investment of £380,000 [12]. While this demonstrates continued confidence in UK property as an asset class, there’s a significant opportunity to redirect some of this capital toward healthcare-specific properties that serve dual purposes: generating returns while potentially addressing future care needs.
Strategic benefits of integrating healthcare SAFs into estate planning include:
This integrated approach represents a more holistic strategy for addressing both wealth preservation and future care needs—a direct response to the challenges posed by rising care home fees.
“Health is the foundation of a prosperous future.” - Michel Demaré
Looking ahead, several key trends are likely to influence the comparative performance of healthcare SAFs versus residential property investments. Understanding these trends is essential for high net worth individuals making strategic allocation decisions.
The broader alternative property investment sector has demonstrated strong growth potential. For instance, the single-family rental market in the US has grown at an average annual rate of 9% over the past five years, outpacing many other real estate sectors. This market is estimated at over $480 billion in aggregate value, reflecting strong fundamentals particularly in markets where affordability challenges persist [13].
In the UK context, healthcare properties are similarly positioned to potentially outpace conventional residential investments due to several structural factors:
Investment in commercial real estate is on the rise in Europe, with retail premises seeing the strongest growth of all real estate asset categories, with investment up 31 percent year-on-year, ahead of hotels (+3 percent), offices (+13 percent) and logistics (+19 percent) [14]. This broader trend of increasing commercial property investment suggests growing institutional confidence in alternative property sectors, including healthcare.
These factors suggest that healthcare property investments, particularly through well-structured SAFs, may offer superior risk-adjusted returns compared to traditional residential property over the coming decade.
The surge in UK care home fees presents both challenges and opportunities for high net worth individuals and families. Traditional property investments, while familiar and often profitable, may not provide the specific inflation protection and strategic advantages needed to address the dual objectives of wealth preservation and future care cost management.
Healthcare-focused Single Asset Funds offer a compelling alternative, providing direct exposure to essential infrastructure with government-backed tenants, inflation-linked income, and potential tax advantages. When integrated into comprehensive wealth and estate planning strategies, these investments can help address the specific challenges posed by rising care costs.
For optimal results, high net worth investors should consider:
As with any investment decision, careful due diligence and professional advice are essential. The optimal strategy will depend on individual circumstances, including existing property exposure, time horizon, liquidity needs, and specific estate planning objectives. By taking a strategic approach that considers both investment returns and potential future care needs, high net worth individuals can develop more resilient portfolios designed to thrive in an environment of rising care costs.
SIRE Capital Partners specializes in providing high net worth individuals with access to institutional-grade healthcare property investments through Single Asset Funds. Their focus on government-backed tenants with inflation-linked leases aligns precisely with the strategic advantages discussed in this article, offering investors both competitive current yields and built-in protection against rising care costs.
The increasing financial pressure from UK care home fees is a significant consideration for sophisticated investors. We observe that traditional property investments, while valuable, often do not provide the specific, robust inflation protection necessary to counter these rapidly escalating costs effectively. Our perspective is that securing income streams explicitly linked to inflation is paramount for preserving real wealth and planning for future needs in this environment. We believe that direct exposure to essential infrastructure assets, particularly within the healthcare sector, offers a more aligned solution compared to broader, less targeted property holdings or publicly traded vehicles which may introduce unrelated market volatility.
Through our focus on institutional-grade healthcare property via Single Asset Funds, we provide the transparency and control our clients require. We understand the operational specificities of these assets and leverage our expertise to manage them effectively. We see the inherent value in long-term leases with government-backed tenants, structured with clear inflation-linking mechanisms, as a fundamental defence against rising costs. This approach, combined with careful structuring for tax efficiency, positions healthcare property as a resilient and strategic component for wealth preservation and intergenerational planning, naturally aligning with our commitment to secure, inflation-linked income for our clients.
Patrick Ryan is a Principal and Co-founder at SIRE Capital Partners, working on Deal Origination and Asset Management. Patrick has spent 20 years in the property sector in London. His first foray into the sector was in 2003 when he co-founded a mezzanine finance business that focused on lending to property developers in and around London. Following this he headed up SIRE Properties, a healthcare focused asset management firm. Patrick has now co-founded SIRE Capital Partners that has expanded on his healthcare asset management focus to take in broader services to include brokerage and capital advisory.
Discover the benefits of pooling resources to access institutional- grade property in a Single Asset Fund.
The UK healthcare market is rapidly evolving, presenting unique investment opportunities in real estate.
A Single Asset Fund is an arrangement whereby like-minded investors collectively allocate funds to invest in a commercial property.
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UK healthcare properties offer stable, inflation-protected returns amid residential market decline. High-net-worth investors find refuge in this resilient sector, driven by demographic trends and international capital influx.
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- Khalid Hussain (Clinical Director at Todays Dental Group)
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HIGH NET WORTH INDIVIDUAL INVESTOR STATEMENT
If you meet condition A or B below, you may choose to be classified as a high net worth individual for the purposes of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.
SELF-CERTIFIED SOPHISTICATED INVESTOR STATEMENT
If you meet condition A, B, C or D below, you may choose to be classified as a self-certified sophisticated investor for the purposes of the Financial Services and Markets Act 2000 (Promotion of Collective Investment Schemes) (Exemptions) Order 2001.
