May 2023 Newsletter

Childcare property continues to offer strong yields. Find out how the economic situation is impacting childcare and childcare property with the experts Childcare Concepts

Australian Government Budget Lays Out 40 Per Cent Rise In Childcare Spending

Child Care subsidy payments are planned to rise more than 40 per cent in six years, as the government expands its payments to families.
Australian Government figures, outlined in the 9 May Budget, tipped the cost of childcare subsidy to rise from $10.62 billion in 2022-2023 to $14.96bn in 2026-2027.

The Budget night announcement followed news of $72.4m over five years for professional development for childcare operators and workers, especially in remote and regional areas. The program is expected to provide backfill support for about 75,000 early childhood educators, teachers and centre directors to upskill in mandatory or highly recommended training.

Early Childhood Education Minister Anne Aly said the program came in response to industry requests.

“Early childhood education is a wonderful career with a clear path for progression, we’re making sure the workforce can access the development opportunities they need,” she said.

The Australian Childcare Alliance welcomed the funding announcement, citing the need to co-design policies to drive accessibility and affordability for all families.

Childcare Attendance Continues To Rise

Childcare property news continues to be positive amid ongoing government incentives and rising attendance rates.

With the Child Care Subsidy set to rise from July 2023, the out-of-pocket cost will decline for nearly all Australian families (96 per cent).

This includes increasing the maximum Child Care Subsidy (CCS) rebate to 90 per cent for families who earn a combined income of less than $80,000.
The Productivity Commission is also seeking submissions into the feasibility of a universal 90 per cent rebate for all families.

These savings, and a renewed focus on early childhood education from the Australian Government, are tipped to drive more families into formal childcare services.

The February National Early Years Strategy Summit brought together 100 delegates from across industry and the community to develop coordinated future plans and funding for the sector.

But the strategy development comes at a challenging time for childcare providers, who continue to struggle with rising costs and staff shortages.

An official estimate from the Education Department put the shortage of childcare workers at 7000 by July this year.

Childcare Property Industry Updates

Major childcare operators have flagged their intention to expand in their financial results.

Embark Education Group, formerly Evolve Education, reported continuing growth in occupancy rates throughout the first four months of 2023. From January to April, occupancy increased from 74 per cent to 81.8 per cent.

With 24 centres across Australia, the group has planned the purchase of another three facilities for a combined $2.7 million.

The Arena REIT reported revenue growth of 6.45 per cent in like-for-like rents across its $1.5 billion portfolio in its half-yearly results.

And Charter Hall’s Social Infrastructure REIT increased its childcare centre assets with the purchase of an additional four centres.

Institutional investors, such as Australian Unity, have highlighted the financial and social benefits driving their investments as they develop their childcare-specific funds.

Analysts have reported market consolidation as a key trend in the childcare property sector. Bigger companies and investors are attracted to alternate assets, given the long-term, stable lease agreements spanning to 20 years.

Child care properties with major operators are also increasingly being tenanted under triple-net lease agreements in which the standard lease is lower but the lessor is responsible for outgoings including property taxes, insurance, maintenance and repairs.

Childcare Concepts News

Childcare Concepts continues to lead the industry in professional appraisal, sales and leasing.

It started strong, with a record number of contracts signed before Christmas settling in the first weeks of 2023.

Following these successful campaigns in both Queensland and New South Wales, our team has a range of qualified buyers ready to proceed with childcare centre purchases. For full details on current listings visit NSW listings or QLD listings or contact our team for all off-market opportunities.

Economic Outlook

Australia’s economic growth is tipped to remain subdued this year, according to the Reserve Bank. Amid lower-than-average global growth, inflation is spurring higher costs of living and declining real wages.

According to the NAB Monthly Business Survey, business confidence has risen, but costs and the availability of workers continues to trouble employers.
Despite the decline, the results remain at a very high level, particularly in the heavy industries.Consumer-facing businesses were more positive than business-to-business companies, but all were strong.

Chief Economist Alan Oster said: “Overall, the survey shows the economy remains resilient. We continue to expect consumption growth to slow as the effect of higher rates further impacts households, but how quickly and how sharply this occurs remains uncertain.”