_Asia-Pacific healthcare evolution: emerging opportunities and challenges

The United Nations projects a remarkable demographic shift in Asia-Pacific: by 2040, the population of those aged 60 and over is expected to rise by nearly 75%, reaching nearly a billion people and constituting one-quarter of the region's population. This monumental trend will have far-reaching implications, reshaping consumer markets, healthcare, and real estate profoundly.

As Asia-Pacific shifts rapidly towards an ageing demographic, what are the long-term opportunities for investors in the space?

The age of opportunity: How real estate can capitalise on Asia-Pacific’s silver population

Seniors and older professionals over 45 are poised to be the wealthiest cohort in the region – a natural progression after years of employment, accumulation and investing. According to Knight Frank’s Wealth Sizing Model, the number of HNWIs in the region, or those with over US$1 million in net assets, will expand by nearly 80% in the next five years, faster than the global average of 56.9%.

The rise in the share of seniors in the consumer class will be a game-changer for the economy. Ageing Asia forecasts that the market value of Asia-Pacific's ageing population will reach an astounding US$4.6 trillion by 2025. This presents an enormous opportunity to develop senior-friendly housing that enables them to age in place comfortably and independently. The demand for age-appropriate housing is expected to skyrocket, creating a lucrative market for developers and investors.

As a result, the share of seniors in the consumer class is expected to grow rapidly and their role in the economy will gain significance. According to Ageing Asia, Asia-Pacific’s ageing market value is expected to hit US$4.6 trillion by 2025. The implications of such high numbers of seniors mean that there is a tremendous real estate opportunity to build homes where seniors can age successfully. As a corollary, the opportunities for more upmarket retirement options will also increase. Higher-end retirement communities will be in demand, offering luxurious amenities, upscale healthcare, and exclusive recreational activities.

Growing allocations and increased demand in long-term care facilities

The private sector is catching on to the lucrative opportunities of an ageing population. Despite pandemic headwinds, investments in the region's care sectors hit an all-time high of US$2.8 billion in 2022. The sector's defensive characteristics and increasing demand for health and wellness services make it a top pick in uncertain economic conditions. A renewed focus on health and wellness, brought on by the pandemic, has also lifted demand. As with most alternative sectors, the structural shortage in supply and higher yields will enable returns to outpace inflation. This is exemplified by Sweden-based EQT acquisition of Stockland’s retirement living portfolio in 2022 for US$987 million.

Spotlight Australia: Ageing population drives defensive investment in retirement living market

Australian healthcare and life sciences investments have gained traction in recent years, first driven by local investors seeking stable assets and now attracting global sector experts and their investors. The shift to defensive assets and increased institutional involvement signals a growing recognition of these industries' resilience and growth potential.

Healthcare and health-related expenditures account for over $241 billion annually in Australia, representing approximately 10.5% of the country’s GDP, with an estimated 73% of this provided by the Commonwealth and State Governments. Of the remaining $65.3 billion, an estimated $17.5 billion is spent by private health insurers.

The significance of this expenditure on healthcare real estate in Australia cannot be understated, and when considered in tandem with the fact that 23% of the population will be over 65 years old by 2062, provides strong support for investment across all subsets of the sector.

The expanding potential of Asia-Pacific’s ageing population: structural tailwinds point towards favourable market dynamics

The retirement living market in the region is highly fragmented, with Australia and Japan leading the way in terms of institutionalized portfolios. However, the region's demographics and wealth dynamics suggest a promising future for upscale retirement solutions. Structural factors such as demographic shifts and healthcare access support market growth, but cultural norms, cost of living, and supply constraints must also be considered, particularly when considering social economics.

Find out more in Knight Frank's Global Healthcare report.