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Investments on the rise in healthcare

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In small economies such as Cyprus, investment opportunities are limited, especially those which can produce reasonable returns in relation to the risk involved.

Due to the introduction of the general public health system, various groups of investors (including foreign ones) have turned their interest towards health related projects, either as healthcare centres or simply as property portfolios.

The creation of multi discipline private clinics (and hospitals) is one option and after examining the occupancy rates of such establishments, they are quite high.  The success of such hospitals, however, have a direct relation to the service quality provided, including the quality and standards of the doctors and the medical staff.

Although items such as location, quality and appearance of buildings are also important requirements, the staff quality is the main reason of success, whereas among client demands, the kitchen and food quality is very important, as are the facilities provided for the patients and visitors, such as cafeterias, etc.

Another service provider which is a necessity in the investment for health are the creation of rehabilitation centres and long-term patience stay.

I have had the opportunity to visit a couple of ready and currently operating rehabilitation centres, which are mainly foreign owned and directly connected to local or foreign hospitals.  These establishments are more like a 5-star hotel and having the unfortunate opportunity to reside for a few days in one them, I was impressed by the staff’s politeness, care and constant pampering.

These are just a few opportunities of indirect investment related to the health sector, which will increase due to the public health system, but there are others ranging from personal physiotherapy centres, speech therapy clinics and other specialized facilities.

Finding quality paramedic staff is one of the problems, be it that in recent years, young people have turned their attention to such jobs which require a university degree and relevant experience.

At this point of time local and foreign universities turn out a satisfactory number of graduates (including midwives), whereas it is evident that more education is required in terms of (at least) foreign language communication.

There is a risk here that if the market does not control the supply of staff, there will be an excess supply, placing in danger the work stability of newcomers.

One wonders how injured, disabled or needy people were looked after prior to these rehabilitation centres.  Most of them were either housed in the terrible standard old people’s home or left in bed at home to more or less die alone.

These health-based investments must be examined with a critical eye regarding security and sustainability of income, since being who we are, the 3-4 rehab centres in Nicosia will soon multiply to 10-15 over the next years, with other towns to follow.

So, competition will be there, whereas the cost of establishing such centres and including the investment for the equipment is quite high (around €100,000/room).

Charges are also high, on average approximately €120-150/day, including physiotherapy, so it is not a cost that anyone can afford. That is why we now place our hope with the general health system (GHS) to provide these services.

Since what matters first is staff quality and service, such investments entail an inherent risk of uncertainty. For this reason, required returns on capital investment in the region of 15% is not unreasonable.

This new situation has attracted the interest of foreign investors such as Israelis and German investors who are out to seek opportunities, whereas we have heard of a Russian investor who is under way erecting a rehab centre in Limassol and has recently concluded its sale to a Russian insurance company for this purpose.

Use your imagination and ascertain your capabilities to run such projects since such investments will not be less than €7.0-10.0 mln, whereas the quality of staff and connection with international establishments or hospital networks is of paramount importance.

 

By Antonis Loizou F.R.I.C.S. – Antonis Loizou & Associates EPE – Real Estate Valuers, Property Consultants & Estate Agents

www.aloizou.com.cy

[email protected]