The Dynamic Duo: Property Investment and Healthcare Demand
The amazing speed of healthcare demand
My baby boy was born in Parkcity Medical Centre (PMC) in 2015. As I had just come to the Klang Valley then, I asked my colleagues / friends about good gynaecologists. They recommended me many different gynaecologists from many different hospitals but no one said PMC. Anyway, I went to PMC because I wanted a hospital which is not too far away from my home. Anything about 20 minutes is considered far for me.
In the beginning, when I sent my wife for her regular pregnancy checkups, it was super easy to find a parking spot at PMC. However, 9 months later, when my baby was born, more than half of the car park spots are occupied. I still remember when I sent my son for his regular injections after he was born, it got even harder to find a car park spot. In brief, this is the growth in the need for medical care.
Many people may have their favourite hospitals but as soon as they have to take 30 minutes to find a car park spot, they will think of another hospital option and once they found a good doctor, they will continue with this good doctor in a hospital they could find a car park spot quicker than that ‘forever-unable-to-find-a-car-park’ hospital. This is why any new hospital would usually be very quickly ‘filled up.’
Demand for healthcare versus supply?
The median age for Malaysia is 30.4 years (DOSM 2021 data). We can go into any supermarket today and take a look at the diaper brands. If you did not notice, the number of brands and diversity are still increasing. It meant that the demand for healthcare from the new babies are still increasing.
At the same time, Malaysia is also already an ageing nation. 7% of our population are 64 years and above. This tells us that the demand for healthcare is growing by leaps and bounds too.
What about supply of new beds in the hospitals? Well, a new hospital cannot be built in 10 months! Whether it’s government or private hospitals does not matter. Usually it takes many years for any new hospital to be approved and for it to be constructed and later for it to become operational. The ‘many’ years here meant that the first time we hear about a new hospital until the day the hospital actually operating will be easily 5 years down the road.
Hospital bed-to-total population (BPR) for Malaysia?
If we have been to our favourite specialist, we would know that appointments must be set in advance. Never try to just walk in because it is not possible these days. This situation is not just in Malaysia but also in many advanced countries. That’s also one main reason why there is a shortage of specialist doctors and this is why medical tourism is growing every year.
Statistically, Malaysia faces a low hospital bed-to-total population ratio (BPR). In other words, the demand for healthcare far exceeds the current availability of hospital beds. According to AmInvestment Bank Berhad (AmInvestment), Malaysia’s BPR stood at 1.98 beds per 1,000 residents in 2019. It is only growing by 1.1% per annum.
Demand for healthcare from non-Malaysians?
It’s not just the demand from Malaysians. To the world of medical tourists, Malaysia is within top 10 destinations for medical tourism in the whole world! (Source: Medical Tourism Magazine). In 2019, over 1.22 million patients travelled to Malaysia for medical treatment. (Source: Statista.com)
Revenue from medical tourism alone is RM1.7 billion. Imagine the spillover and the multiplier effects to the economy. The more spending, the more hiring of medical professionals and these professionals will be spending their salaries in the local economy too. This is why RM1.7 billion will generate many billions of multiplier effects to the economy.
How big is the medical tourism in the world?
Let’s just look at three things. The current size, the forecasted size and also the compounded annual growth rate. All three are super positive.
“The global medical tourism market is projected to grow from $13.98 billion in 2021 to $53.51 billion in 2028 at a CAGR of 21.1% in forecast period, 2021-2028.” Source: Fortunebusinessinsights.com
As a top 10 receiving country for medical tourists, these numbers tells us one very clear thing. Malaysia needs many more hospitals than what is available today.
How could we gain financially from the growth in medical tourism?
Actually, there are many ways. The most direct way may just be to secure all the necessary approvals and build a hospital! Hire a very capable team, make them shareholders of your hospital so that they would do their very best for themselves too. Okay, very few of us could actually do this. Whether it’s financially or even capability and the relevant connections and even know-how, it’s just too hard to do!
The next one is to invest into medical tourism related stocks from the stock market. I think this is one good way since we could get stable dividends moving forward. Please do not expect super high dividends though because hospitals would need continuous investments on equipments and also other expenses too. Let’s not forget that they would also need to continue expanding too.
The third one is to buy a property nearby hospitals and rent out those units to the medical professionals working there; patients who are recovering, friends and family of patients who are visiting from out of state or overseas. Just need to make sure we also have someone managing the units yeah. I am someone who prefers to just pay and have everything done by the agent / management company. I am not someone who love to clean up after every tenant has left, opening door for every new tenant and even attending to requests is NOT something I love to do.
Rental returns and also potential capital appreciation
By the way, buying a property and renting it out would gain not just the rental returns but also the potential capital appreciation too. As room rentals continue to go up over the years, the property price would also be increasing too. As a long term investment, property remains one of the very best and it’s something real too.