Not for release or distribution in the US

A significant demographic shift in Asia has resulted in the emergence of senior living real estate as a significant potential investment opportunity in economies such as Japan, China and Korea, according to AMP Capital.

A new whitepaper entitled Investing in the grey boom: A role for senior living real estate in Asia, which was authored by AMP Capital Associate Director Christopher Deves, looks at shifting trends in aging in these countries from a cultural and economic perspective and how these changing demographics are creating demand for senior living real estate such as aged care homes and assisted living facilities.

AMP Capital Co-Head of Global Listed Real Estate James Maydew said if Japan, China and Korea can securitise their senior living real estate assets, as has been the case in other regions such as North America, it has the potential to be a powerful opportunity for long-term investors in real estate.

Mr Maydew said: “Listed real estate is connected to some of the most important long-term trends in society. Demographic trends such as declining birth rates, urbanisation and increasing workforce participation are challenging the traditional model of in home family care in Asia. Coupled with rapidly aging populations in Japan, China and Korea, this should see demand for greater investment in senior living real estate including from global investors.

“Furthermore an increasing pool of capital through growing domestic pension schemes in Asia, the desire for Asian investors to invest in local real estate and the requirement for liquidity should see the long-term structural demand for listed real estate investment opportunities in the region continue to grow.”

The whitepaper shows a number of long-term structural trends compromise the sustainability of traditional models of family care in Japan, China and Korea. For example, Tokyo has been a beneficiary of internal population growth for more than 20 years as urbanisation trends see children move away from their ancestral home. And increasing workforce participation, such as in Korea where the female workforce participation rate has increased from 46 per cent in 1980 to 57 per cent in 2014, means there are less people to care for elderly family on a regular basis.

Mr Maydew added: “The power of demographics to fundamentally shape society’s demand pattern for all real estate sectors should be a key consideration for all investors in the asset class. Japan’s REIT market is well established, aided by a long history of zero interest rates and the resulting appetite for yield.

“The emerging senior housing opportunity could be the catalyst for both Korea and China to further develop their REIT options, and provide an attractive option for foreign investors looking to diversify away from the more established REIT hubs such as Singapore and Hong Kong.

“Clearly there remain some challenges to the emergence of senior living as an investible sector in the region but the sheer weight of demographic change suggests these will be hurdles rather than roadblocks over the long term.”

Investing in the grey boom: A role for senior living real estate in Asia is the second in a series of AMP Capital whitepapers on the listed real estate sector. The whitepapers aim to showcase the diverse individual investment themes and investment opportunities in real estate.

The paper can be downloaded here