Victorian childcare sector sales tip $249.06 million

Victoria’s childcare market has experienced a bumper 2017, with almost $250 million worth of centres sold year to date.

Thirty-nine on-market transactions in Melbourne’s suburbs, spanning from Tarneit to Pakenham, have made up the record sum, with an average sale price of $6.7 million, well up on 2016, where 19 deals averaged $3.9 million per childcare centre.

The figure is significantly more than what has been achieved in the past three years, which saw circa $75 million worth of deals transact in 2016 and circa $63 million across 2014 and 2015 combined.

Savills Australia has been at the forefront of this activity, claiming the market share with 40.8 percent of sales for a total of $101.68 million in 2017 to date.

“This figure represents the highest value of individual sales ever achieved by an agency in Victoria for a calendar year,” Melbourne CBD & Metro Sales director, Julian Heatherich, said.

He and colleagues Mark Stafford and Benson Zhou have transacted some of the most significant and valuable childcare centres in the state.

“In 2017, Savills has achieved an average childcare centre sale price of $7.3 million, highlighting the strength and depth of our buyer pool,” Mr Heatherich said.

The team has achieved yields as low as 3.89 percent, with the average yield sitting at 5.71 percent for Victoria.

“These results have been achieved through a comprehensive understanding of the childcare market and our extensive local and international database,” Mr Heatherich said.

“The reach of this database is emphasised by 13 of our 14 most recent sales selling to offshore investors.”

Mr Heatherich said demand was being driven by buyers seeking to achieve a greater return on their investments, as they looked away from traditional banking and interest.

“With strong interest and engagement expected to hold up until the end of the year, we envisage this trend will continue well into 2018,” he said.

The amended federal government legislation for childcare subsidies, which comes into effect mid next year, is another driving factor behind the increase in childcare centre sales, according to Mr Heatherich.

The federal government’s $1.6 billion childcare package will allow a family earning less than $65,000 a year to have 85 percent of their child care bills paid for by taxpayers.

“This is likely to encourage more parents to utilise childcare services and will create a need for more childcare centres, thereby fueling sales to take advantage of demand, and incentivising developers to take off-the-plan assets to market,” Mr Heatherich said.

“At present, the average cost per childcare place in Victoria is $55,000, making a lucrative proposition to investors as a steady source of income.

“This is well up on 2016 which was $39,000, 2015 which was $37,000, and 2014 which was $25,000.”

Learn more about the Melbourne CBD and Metropolitan Sales team.