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Singapore’s residential and industrial sectors seem to be stagnant at the present moment, with sales transactions remaining flat for the past few quarters. According to analysts, the local property market is expected to remain tepid over the next few quarters, with prices expected to continue on a slow descent, under the pressure of the cumulative effects of the cooling measures and the Total Debt Servicing Ratio (TDSR) framework.
While the traditional sectors in the local property market are in a slump, there is one sector that is experiencing a boom, and that is none other than the medical suites sector, one of the sub-segments of the property market.
According to Grace Ng, Deputy Managing Director at Colliers International, Singapore’s ageing population adds lustre to this sector.
“Demand from doctors (owner occupiers) comes from those who may be renting premises like Paragon/Camden, those who want to expand from smaller to bigger premises or set-up group practice, and those aspiring public hospital doctors who want to set up their own practice,” said Ng.
Adding on to what Ng said, Karamjit Singh, Head of Investment and Residential at JLL, shared: “The growth in the overall medical industry has been driving prices up. And the fact that there are established centres means there’s always going to be a premium for being housed in an established centre.”
And it’s not just the locals that are seeking medical treatments; foreign demands have also driven the need for more medical facilities. A study from business consultancy RNCOS estimates the medical tourism industry in Singapore to be worth around $1.74 billion last year, with growth expected to continue at a compounded annual rate of about 30 percent until 2017.
In the near term, in view of the expected increase in the number of practising private doctors, as well as the lack of new supply up till 2016, prices and rents of medical suites are expected to continue to increase.
Medical tourism on the rise
According to one of DTZ’s research reports, Singapore’s developed medical infrastructure, and quality-driven and reputable integrated healthcare system have resulted in an increase in the number of foreigners seeking medical treatment here.
“The medical component of tourism receipts has increased steadily since the recovery from the global financial crisis in 2009. In 2012, the medical component of tourism receipts increased 13 percent year-on-year to $1.1 billion. This made up effectively 4.8 percent of total tourism receipts for the year. This bodes well for the private healthcare industry in Singapore as medical tourists or overseas patients are believed to account for a significant proportion of earnings,” stated the report.
Allure of investing in medical suites
Apart from the increasing demand, analysts say that another factor that is adding to this sector’s popularity is the fact that medical suites are not affected by cooling measures.
According to the Urban Redevelopment Authority (URA), medical suites can fall under either commercial or healthcare zoning. These segments of the property market are not affected by cooling measures, which therefore enhances the appeal of medical suites to investors.
With seemingly more advantages rather than disadvantages of investing in medical suites, it comes as no surprise that its not just investors who are attracted to this sector, apparently, property developers have also started taking interest in the industry as well, with at least five new mixed developments – housing around 500 medical suites or over 35 percent of current supply – to be ready by 2018.
Going forward, analysts believe that the prices of medical suites will continue to see steady growth. They cited factors, including fewer restrictions in the commercial property market compared to the residential, as well as overall growth in the medical industry, driving demand.
The increase in the number of medical suites is also part of a bigger expansion of the entire healthcare industry in Singapore. Over the next six years, some seven new hospitals are expected to open here. These include Farrer Park Hospital at Connexion, Sengkang General Hospital and Jurong Community Hospital.
A safe investment
According to DTZ’s research report, one of the factors that make medical suites an attractive and relatively safe investment is the fact that this sector is to a certain extent, recession-proof.
“The primary occupiers sought for medical suites are medical practitioners, and thus the demand for these units is directly linked to growth in the healthcare industry. This puts investors of this asset in a unique position, as unlike other commercial properties, the demand for medical space is less sensitive to economic trends, economic changes and business sentiment, which can be rather volatile,” said the report.
Areas to look at
“Despite the large stock in Orchard Road/Tanglin, it is the Novena/Thomson area that is growing towards becoming the medical hub of Singapore. This is due to the clustering of medical service facilities (both public and private), including nursing homes, home care and day rehabilitation providers as well as private sector practitioners. Mount Elizabeth Novena Medical Centre, also part of the Parkway Pantai Group, has close to 260 medical suites while the Novena Specialist’s Centre and Novena Medical Centre, both by Far East Organization, collectively house about 215 units,” the report noted.
Up and coming
The DTZ research report also highlighted a new growth area for healthcare – Farrer Park/Race Course Road. “Clinics at Farrer Park Medical Centre, part of the mixed-use development, Connexion, received its Temporary Occupation Permit (TOP) in April 2014. The medical centre, which is the first in the area, is directly linked to the 145-bed Farrer Park Hospital and is also in close proximity to KK Women and Children’s Hospital. Upon completion, most of the 189 units had been sold off with only smaller units of sizes between 700 and 800 sq ft still available for sale.”
Image: Facade of the Novena Specialist’s Centre and Novena Medical Centre. (Photo by Far East Organization)
Romesh Navaratnarajah, Singapore Editor of PropertyGuru Group, edited this story. To contact him about this or other stories email romesh@propertyguru.com.sg
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