Savills Healthcare: UK Market Roundup – H1 2025

Market Summary

• MSCI data shows Senior Housing and Care Home investment has started the year strong, with £1.5 billion deployed in the first half of 2025, the strongest H1 in the past decade. Investment activity has been led by the Care Home market, which has accounted for the majority of activity over the last five years. Strong pricing power in the UK market, where nearly 50% of Care Home residents are private pay, has enabled providers to raise fees above inflation and absorb rising costs, driving profitability. A more favourable interest rate environment, improved operator performance, and increased use of alternative investment structures to enhance returns in line with current cost of capital have further supported investment volumes across both markets.

• US investors have recently targeted UK healthcare REITs trading at discounts to net asset value. For example, US-based CareTrust REIT acquired UK-based CareREIT at a premium to market value, while UK REIT Assura’s board initially recommended a bid from KKR and Stonepeak (but later withdrew its support in favour of a proposed merger with PHP, which has now been approved by shareholders).

• The Private Hospital market is also showing continued strength, supported by NHS demand for outsourced elective procedures and ongoing growth in the private pay segment. The privately funded secondary care market continues to expand, with non-NHS inpatient admissions reaching a record 939,000 in 2024, up 3% year-on-year and marking the third consecutive year of record volumes.

• Healthcare development activity has remained subdued since 2022, largely due to rising build costs, challenging debt conditions, ongoing planning constraints, and land values not adjusting to a more challenging macroeconomic environment. New Care Home delivery has primarily focused on private-pay schemes in London and the South, where development economics are more viable, exacerbating the existing North–South supply imbalance. However, improving debt conditions and improving market sentiment are beginning to support the pipeline of new-build schemes. While high land and construction costs remain key barriers, viability has notably improved compared to 12–15 months ago.

• The Government Spending Review (June 2025)¹, UK Infrastructure Strategy (June 2025)², and Fit for the Future NHS 10 Year Plan (July 2025)³ signal a renewed government commitment to healthcare investment, with a focus on technology, primary and community care and growing support for public-private partnerships in infrastructure delivery.

• As rising demand, workforce pressures, and the need for more personalised care reshape the NHS, technology is becoming increasingly central to service delivery. The ten-year plan sets out a digital overhaul including unified health records via the NHS App, wider use of AI, remote monitoring, digital therapeutics, wearable integration, and a new NHS HealthStore to streamline approved technologies.

Healthcare Policy Update

The June 2025 Spending Review committed to a £29 billion real-terms increase (£53 billion cash uplift) in annual NHS day-to-day spending between 2023/24 and 2028/29, equivalent to 3.0% average annual real-terms growth, taking total spending to £226 billion by 2028/29. It also included a £2.3 billion real-terms annual increase in the Department of Health and Social Care’s capital budget by 2029/30, a more than 20% real-terms rise, supporting investment in technology, hospitals, and primary care.

Also published in June, the Treasury’s UK Infrastructure Strategy set out a clear ambition to expand the role of private capital in national infrastructure delivery. It confirmed that the Government will explore the use of Public-Private Partnerships (PPPs) in healthcare infrastructure, particularly in primary and community care, with a decision expected in the Autumn Budget 2025.

NHS England’s Fit for the Future plan (July 2025) set out a ten-year strategy to shift care from hospitals to the community, expand preventative healthcare, and embrace digital tools. Key measures include 250–300 neighbourhood health hubs, NHS App upgrades, wider use of AI and genomics, and action on public health and inequalities. It also commits to workforce growth and primary care investment. The plan follows Lord Darzi’s 2024 Independent Investigation of NHS England⁴, which warned that the system is in 'critical condition' and called for urgent strategic change, with the plan addressing several of the key challenges he identified.

The 10 Year Plan for the NHS also states that it will 'continue to make use of private sector capacity to treat NHS patients where it is available' and will 'enter discussions with private providers to expand NHS provision in the most disadvantaged areas.' This reinforces the growing role of private providers in NHS delivery and highlights private healthcare as an increasingly attractive area for investors.

The plan sets out a major digital transformation of England’s health system, shifting toward integrated, data-driven, and patient-led care. Key changes include a fully unified digital health record accessible via an upgraded NHS App, expanded use of AI (e.g. clinical scribes, virtual triage), remote monitoring, and prescribed digital therapeutics. Wearables and genomics will feed real-time data into personal prevention pathways, while a new NHS HealthStore will standardise the adoption of approved health tech.

Senior Housing and Care Homes: Strongest H1 Investment Volumes in a Decade

Investment volumes have rebounded in 2025, with £1.5 billion deployed in H1 alone, just below the full-year total for 2024 (£1.7 billion) and 60% higher than the full-year total deployed in 2023. This major uptick signals renewed investor confidence, supported by rising care fees, easing financing pressures, and improving operator performance and profitability.

During the course of 2024 and into H1 2025, the UK saw investment volumes rebound following low levels of activity in 2023, with US capital playing a prominent role. One strategic approach was the use of management contracts and RIDEA structures (for US REITs), which offer greater flexibility and allow real estate investors to participate in the operational upside of the asset, enhancing return potential. (You can read more about this in Savills Healthcare’s 2025 UK and European Care Home Investment report.)

Increases to National Insurance contributions introduced in April 2025 have placed additional strain on independent health and social care providers. The Nuffield Trust estimates that the change to employer National Insurance contributions (ENICs) will cost the independent social care sector approximately £940 million in 2025/26. This comes on top of around £1.85 billion in additional costs required to meet the new National Living Wage rates, also announced in the April 2025 Budget. While operators at the premium end of the market with predominantly private-pay residents may offset rising costs through above-inflation fee increases, providers that are more reliant on Local Authority-funded placements are likely to face continued margin pressure. Despite ongoing government support, recent uplifts in Local Authority care fees remain modest in the context of rising wage, staffing, and inflationary pressures.

The Labour government’s Immigration White Paper (May 2025) confirmed that the visa route for overseas care workers will officially close on 22 July 2025; however, limited in-country transitions are allowed until 2028. Framed as a response to exploitation within the migration system, the policy marks a significant shift that is expected to intensify workforce pressures in the social care sector unless it is offset by strengthened domestic recruitment and retention efforts.

Care Home occupancy has fully recovered from the Covid-19 downturn, with demand now exceeding pre-pandemic levels. Following more than a decade of relatively static demand, there are early signs of renewed growth, likely driven by demographic ageing and relatively limited net new capacity being added to the market. While occupancy dipped slightly at the start of the year, consistent with seasonal trends, it has since stabilised at 86%.

Private Hospital Market: Public and Private Demand Remains Strong

The UK’s hospital acquisition market is limited by the predominance of NHS-owned institutions, resulting in few sizeable private platforms and infrequent transactions. A standout deal occurred in 2024 when Assura acquired Northwest Healthcare’s UK private hospital portfolio: 14 hospitals, for £500 million in a combined cash-and-shares transaction. Since then, Assura has received a £1.79 billion merger proposal from Primary Health Properties, in a very strong indication of the growing momentum in and optimism for UK healthcare real estate.

NHS England’s 2025/26 operational planning guidance, published in January 2025, set out new elective care recovery targets. By March 2026, 65% of patients should be treated within 18 weeks of referral, and the proportion waiting more than 52 weeks should fall to below 1% of the total waiting list. Longer-term ambitions include returning to the statutory 92% 18-week standard by March 2028, which was last met in September 2015.

The NHS waiting list stood at 7.4 million treatments at the end of May 2025, down from a peak of 7.7 million in August 2023. While the largest reductions have been among those waiting over 52 weeks, reflecting targeted government efforts, progress has been slow. Waiting lists have been described as ’falling’ for over a year, yet remain persistently high. This underscores the continued, and potentially growing, role of the private sector in meeting patient demand.

In January, the NHS and independent sector reached a formal agreement to align digital systems, enabling NHS-funded care delivered by independent providers to be booked, accessed, and viewed via the NHS App. Earlier in the year, some regions sought to cap total spending on NHS-funded referrals to independent sector providers, prompting backlash from providers. NHS England ultimately reversed this approach, opting instead to rebalance tariffs, most notably through in-year reductions to cataract procedure payments.

Enlisting the help of the private sector is one of the measures the Government has taken to reduce pressures on hospitals and help cut waiting lists. In terms of activity share, the independent sector is now consistently delivering 10% of all NHS elective care, up from around 8% pre-pandemic. This proportion is higher still in the case of admitted elective activity, with the independent sector treating almost 1 in 5 admitted elective patients.

Strengthened NHS partnerships with independent providers are expected to support the development of the private acute hospital market and improve the investment outlook. However, workforce shortages, particularly among nurses, remain a critical challenge across the UK and continue to pose a risk to operational performance.

We are seeing continued strong growth in the privately funded secondary care market. Non-NHS private hospital/clinic admissions reached a record 939,000 in 2024, up 3% on 2023 and marking the third consecutive year of record highs. Growth was seen across all UK nations, with Northern Ireland recording the highest percentage increase (+12%), while England saw the largest volume rise (+22,900). The rise was driven primarily by a 6% increase in private medical insurance-funded admissions, now at record levels, while self-pay admissions fell 3% but remained historically strong. Compared to 2019, total admissions are up 20%, with insured and self-pay admissions rising 14% and 38%, respectively.

Outlook

• Savills 2025 UK and European Care Report identifies the UK as the most attractive care home real estate market in Europe going forward. This is due to strong pricing power, growing private-pay demand, and the availability of sizeable, scalable portfolios, offering compelling opportunities for institutional and cross-border capital. US investors continue to demonstrate strong interest in the UK, pointing to sustained international inflows into the sector.

• Private hospitals are experiencing elevated demand from both NHS and private-pay patients. With NHS waiting lists remaining persistently high and ongoing industrial action from medical professionals, the role of the private sector in elective care delivery is expected to grow. Recent policy moves, such as a reversal of payment caps and digital integration of independent providers into the NHS App, underscore the Government’s continued reliance on the independent sector to meet care delivery targets.

• The outlook for UK primary care real estate is strong, supported by the stabilisation in yields since the market shift in late 2022, improving rental growth, and growing political support. Government funding commitments, support for private infrastructure investment, and rising demand from an ageing population point to a new investment cycle. With secure income and structural undersupply, the sector offers a compelling long-term opportunity.

• Investor interest in UK healthcare real estate remains strong, supported by a stabilising macroeconomic backdrop and growing policy support for public-private delivery, particularly in primary and acute care. In the care home sector, rising wages and immigration changes may put pressure on margins, especially for providers that are reliant on Local Authority funding. However, strategies focused on private-pay demand and operational upside remain well-positioned.

• With capital available and financing conditions improving, momentum is expected to continue into H2 2025 and beyond.

Savills Latest Thought Leadership

UK and EU Care Home Report 2025

UK Primary Care Report 2025

REFERENCES

• ¹ Government Spending Review 2025
• ² Treasury UK Infrastructure: A 10-Year Strategy
• ³ NHS 10 Year Plan
• ⁴ Lord Darzi's 2024 report on the state of the National Health Service in England 

FURTHER INFORMATION

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