Green shoots or dead man’s boots?
Are comments regarding economic ‘green shoots’ premature for the healthcare market? TOM ROBINSON of Edward Symmons Healthcare doesn’t think so.
I won’t hide behind word-play describing ‘herbaceous economic sproutings’ or ‘springlike uprisings’ as the fact remains that there appears to be increased activity in the healthcare market. Nonetheless, one shouldn’t conclude all is rosy and that capital growth will return to the heady days of 2006 and 2007 – the issue is much more complicated than that.
We are not claiming that recessional worries are irrelevant as care homes have been affected over the past two years, albeit not as much as general commercial (40% down) and residential (20% down) property, but this is likely to be a question of different cycles. The fundamental reason why profit multipliers are lower than before is because future profits are under threat and a purchase at a high multiple only adds up with rapid profit growth (expected in years gone by), but over the next few years such growth is unlikely. The next few years could be challenging for a number of reasons:
- Higher financing costs
- Less capital r