Healthcare real estate is a term used to describe properties designed for the housing and care of the elderly, people with disabilities, or others in need of care. Think of residential care centers, assisted living facilities, recovery centers, or hospitals.
It is a sector that has attracted significant interest in recent years, from both investors and users. But why is that? And how can you, as an investor, profit from this growth market? In this article, I provide an overview of the benefits, risks, and opportunities for investing in healthcare real estate in Belgium.
Why is Healthcare Real Estate Interesting?
Healthcare real estate is a compelling investment category for several reasons:
- Demographic Evolution: The aging population is driving an increasing demand for adapted and high-quality care infrastructure. According to the latest forecasts from Statbel, the number of people aged 65+ in Belgium will rise from 2.2 million in 2020 to 3.1 million by 2050—an increase of 41%. Moreover, the 80+ age group will grow even faster, doubling from 0.7 million to 1.4 million. This group often has higher care needs and a greater requirement for adapted housing.
- Societal Trends: The expectations and desires of the elderly are changing. They want to live independently and comfortably for longer, with necessary services and care within reach. They also demand more freedom of choice regarding their living environment. This stimulates the development of innovative concepts like service flats, assisted living, and co-housing.
- Economic Reality: The government lacks sufficient resources to meet the growing demand for care. Social security is under pressure due to aging, rising healthcare costs, and limited growth in the working population. Therefore, the government encourages the privatization and professionalization of the care sector through subsidies, tax benefits, and accreditations for private care providers. This creates opportunities for investors to help build the care of the future.
What Are the Benefits?
- Stable and Attractive Returns: Rental income is usually indexed to inflation, protecting the investor’s purchasing power. Lease contracts are often long-term (15 to 30 years) and “triple net,” meaning the tenant is responsible for all costs, maintenance, and repairs. In 2020, the average gross rental yield for healthcare real estate in Belgium was 4.5%, higher than residential (3.6%) or office (4.2%) real estate.
- Low Vacancy: The sector benefits from structural, growing demand that is not dependent on the economic cycle. Waiting lists are common, keeping vacancy minimal. Tenants are usually reliable parties like care operators or non-profits.
- Diversification: Healthcare real estate has a low correlation with other property types and the stock market, improving your portfolio’s risk-return ratio. It is also less sensitive to location since the demand for care is universal.
- Social Value: It’s not just financially interesting, but socially relevant. By investing, you contribute to quality infrastructure that improves the well-being of the elderly and those in need of care.
What Are the Risks?
Investing in healthcare real estate is not without risk. Factors to consider include:
- High Entry Barrier: It is a relatively expensive investment. The purchase price of a service flat or care center is often higher than that of a standard home.
- Complex Regulations: The sector is subject to strict and changing regulations that vary by region. Properties must meet specific standards for safety, accessibility, and comfort.
- Operator Dependency: You are heavily dependent on the quality and continuity of the tenant (the care operator). If the operator goes bankrupt or loses their accreditation, it negatively impacts your income and the property’s value.
- Sensitivity to Interest Rates: Like all real estate, rising interest rates can impact financing and profitability.
How Can You Invest? (2 Options)
There are different ways to invest, depending on your budget and risk profile. We discuss the two most common options: buying a service flat or buying shares (REITs).
Buying a Service Flat (Direct Investment)
A service flat is an independent living unit within a larger complex offering services like meals, cleaning, and nursing. You can buy a flat and rent it out to a resident or a care operator.
- Tax Benefit: Purchase often qualifies for a reduced VAT rate of 12% (instead of 21%), provided the flat is state-recognized. Rental income is generally tax-exempt for private individuals if used for personal housing needs.
- Guaranteed Occupancy: If you rent to a care operator, they often take on the role of the primary tenant, guaranteeing occupancy and handling management.
- Returns: The average net rental yield was around 3.8% in 2020.
The downsides? High entry price, limited liquidity (harder to sell), and dependence on the specific operator’s success.
Buying Shares / REITs (Indirect Investment)
For those who prefer a “hands-off” approach with a lower budget, investing in listed real estate companies (GVVs/REITs) specializing in healthcare is an excellent alternative.
Major Belgian Players:
- Aedifica: The market leader in Belgium, with a portfolio of over 500 properties across Europe.
- Cofinimmo: A diversified giant where healthcare real estate makes up about 60% of the portfolio.
- Care Property Invest: Focuses exclusively on healthcare real estate in Belgium (mainly assisted living).
- Home Invest Belgium: Primarily residential, but with a growing segment (approx. 10%) dedicated to care housing.
Pros of Shares:
- Liquidity: You can buy and sell instantly on the stock market.
- Low Entry: You can start with as little as €100.
- Diversification: You instantly own a piece of hundreds of buildings across different countries.
- Tax Efficiency: These companies are exempt from corporate tax if they distribute 80% of their profits as dividends. (Note: Dividends are subject to 30% withholding tax, though some healthcare REITs may qualify for a reduced 15% rate under specific conditions—always check the latest rules).
Cons of Shares:
- Volatility: Share prices fluctuate daily with the stock market.
- No Control: You depend on the management’s strategy.
Conclusion: How to Choose?
- Choose a Service Flat if: You want a tangible asset, tax benefits on the purchase, and are looking for a long-term, steady commitment with social impact.
- Choose Shares (REITs) if: You have a smaller budget, want higher liquidity, prefer to spread your risk across many buildings, and want a truly passive income..
Investing in healthcare real estate is a robust choice for the future, driven by undeniable demographic trends. Whether you choose bricks or stocks depends on your personal style as an investor.
