The South African economy contracted 3.2 percent in the first quarter of 2019 making it the sharpest decline since 2009. Mathe (2019) states, that this phenomenon is primarily thanks to Eskom’s power cuts which resulted in a decrease in production primarily in the mining and manufacturing sectors. Addition to the fiasco that is the state-owned enterprise; Eskom, 1 in 7 South Africans are selling their properties with the sole purpose of emigrating, this is a consequence of the political uncertainty and government interference that has plagued South Africans. Furthermore, the high crime, tax and unemployment (27.6%) rates do not bode well for businesses and citizens operating locally (Business Tech, 2018).
To support the claim of South Africans selling their properties to emigrate: FNB’s Estate Agents Survey (2019), for the first quarter of 2019 shows that emigration-driven property sales now account for 14.2% of all sales, up from 10% in the last quarter of 2018. With these challenges facing South Africans what options do we have at our disposal?
Why invest in the US & specifically the Medical sector?
The American economy, on the other hand, has seen steady growth with 10 years of expansion, the longest on record according to the National Bureau of Economic Research, (2019) Li, Y. (2019). This has partially been fuelled by Tax Reforms which resulted in lower corporate tax rates and has increased the attractiveness of the real estate industry (Bellafiore, 2019). The US stock markets set a record high on the closing of June last month with S&P 500 index climbing 6.3% in June, according to (Refinitiv, 2019). That’s the S&P 500’s best month since January it is also the best June since 1955, when the index climbed 8.23%.
The US unemployment rate fell to 3.8 percent in February 2019 from 4 percent in the previous month making it the lowest in half a century. However, there are still risks to the economy, especially from an escalation in the trade conflict between the United States and China, and low inflation.
Turner & Lovelace (2019), state that President Donald Trump has signed an executive order recently that intends to decrease health care prices and make them more accessible to consumers. The order directs the Health and Human Services Department to develop a rule that would require hospitals to disclose prices that reflect what insurers and patients pay for common items and services ensuring the there is more transparency in the Healthcare market.
According to Orbvest (2018), Demographic trends signal a strong demand for medical office space in the long-term with 10 000 US citizens turning 65 every day. This growing 65+ account for the highest per-capita healthcare spending and it is said to double by 2050. This increase in primary thanks to the technology sector that has provided more advance medical equipment and pharmaceuticals, extending the life expectancy of many Americans. This aging population requires an extensive and robust healthcare industry, underpinned by government expenditure. Historically, this industry has proven to be “recession proof”, which makes it a resilient sector in which to invest.
Demand for healthcare services steadily rises, keeping occupancy consistently between 92%-92.5%. Rising investor confidence in the medical owned business segment has driven increased transaction value ($8.8 billion in 2018) and kept cap rates near record lows (6.34% as of Q4 2018).
We are providing investors the opportunity to invest in the global real estate market from $10 000. Clients use an online platform to invest into low risk commercial assets, primarily in the Healthcare market.These investments produce quarterly dividends of ±8% per annum with a targeted IRR of 12%-17%. To learn more about diversification and the opportunities at your disposal view our available investment portfolio.