The childcare and aged-care sectors are set to receive a boost after the Federal Government committed to increasing its investment in the sectors.
As a part of the Federal Budget, the government announced a $4.7 billion investment into making childcare more affordable and from July 2023 childcare subsidy rates will increase up to 90 per cent for eligible families earning up to $530,000.
Ray White Commercial, Head of research, Vanessa Rader said the investment is likely to have a positive impact on occupancy levels.
“This will likely result in more families taking up childcare places and will pressure the already low vacancies,” Ms Rader said.
“The anticipated uplift in demand for childcare bodes well for existing establishments and their owners together with those extending or developing new centres.
“Many experienced operators are seeking out new opportunities to grow their operations into new suburbs and markets, despite high development costs, the uplift associated with increased returns being increasingly attractive.”
Ms Rader said even though interest rates were increasing there was continued demand for childcare assets at low yields, with their long-term returns with fixed increases proving attractive to a range of buyers.
“Those buyers who have invested into childcare assets with development upside are well placed to benefit from this increase in demand for places and likely uplift in income which comes from improvements in subsidies,” she said.
“Similarly, growing demand to lease these assets are expected to emerge setting new benchmarks for rents, improving the returns for childcare investors.”
Aged-care will also see an increase in government investment, with over $810 million earmarked to support aged-care providers.
“A further $2.4 billion commitment to the education and increasing in care provided in nursing homes will further enhance the attractiveness to older Australians putting further pressure on an already high occupancy asset class,” Ms Rader said.
“With limited investment opportunities for aged care assets in the market, we may see an increase in development in this space to cater for our ageing demographic.”
Ms Rader said asset classes that attract high government subsidies continue to be in strong demand by investors despite the changing market fundamentals.
“While the cost to borrow has increased, the anticipated uplift in returns coupled with high occupancy, strong land values, particularly those with future development opportunities will keep investment demand up,” she said.
