Demographic trend provides impetus in the healthcare sector

The demographic trend has been seen as a “megatrend” for some time. Current figures show that this phenomenon is continuing to accelerate. In particular, the increase in the number of people over the age of 65 is driving demand for healthcare properties. At the same time, this development has led to an increase in healthcare expenditure worldwide. Many European countries already spend 10% or more of their gross domestic product (GDP) on the health of their populations.

In Switzerland, the Swiss Economic Institute (KOF) expects healthcare expenditure to rise by 4.4% in 2024 and 3.7% in the current year. Over the past ten years, growth has averaged 3.2%. In 2024, annual per capita health expenditure amounted to around CHF 11 000. According to KOF, the main growth drivers in the healthcare system in terms of service providers are hospitals, social medicine institutions and medical practices.

Changing needs of the older generation are leading to an increasing demand for alternative forms of housing. An Ipsos survey from 2021 shows that many seniors want more freedom of choice. However, current forms of inpatient care often do not live up to these expectations. While the trend is towards an individualised society on the one hand, there is a growing desire for community on the other. Forms of housing such as co-living and co-working offer new opportunities here.

In addition, adaptive care and housing solutions are needed that offer sufficient privacy and a care-friendly infrastructure to promote both a sense of belonging and individual care. Sustainable buildings that are geared to the needs of residents are key to long-term success.

The combination of senior housing and nursing home has several advantages. On the one hand, the transition from one form of care to another is smoother in terms of medical and specialist care. This is especially true for people with dementia, of whom almost one in two now lives in a nursing home. Secondly, the combination of the two options makes sense from an economic point of view, something that larger operators in particular have already recognised. According to the consulting firm Jones Lang LaSalle, the number of nursing homes that offer not only care, but also senior housing or assisted living has been increasing for years.

There is a clear correlation between the ageing population and the demand for healthcare properties. The Obsan report 03/2022 calculates what this increase could look like for Switzerland: in nursing homes, the need for additional long-term beds is expected to increase by a factor of 1.6. With an average of 59 beds per nursing home, 921 new nursing homes would have to be built. At the same time, the number of Spitex clients would increase by a factor of 1.5, while the number of short-term stays in nursing homes would increase by a factor of 1.6. The number of residents in assisted living arrangements is expected to increase by a factor of 1.4.

The European healthcare sector is gaining in popularity due to its defensive characteristics and long-term demographics. It has become more competitive, with large operators in key markets and new business models. Despite temporary challenges such as rising interest rates and operator issues, the sector remains resilient, especially in diversified portfolios covering different countries and sub-sectors.

In 2024, the healthcare sector accounted for 2.2% of the total investment volume in Europe, an increase of 4% compared to 2023. Investors with in-depth knowledge of the healthcare value chain pursued an active strategy to take advantage of market opportunities. In particular, the increase in the number of people over the age of 65 is driving demand for healthcare properties.

Swiss Life Asset Managers recognised these demographic trends early on and expanded its offering beyond the traditional nursing home model. Today, the portfolio comprises a broad spectrum of age-appropriate solutions, including residential facilities that can be used flexibly. We rely on a local methodology to take into account regulatory and financial differences. Our pan-European investment strategy avoids concentration risks and favours sustainable operating models for all stakeholders.