By Sterling Property Partner Jake Wallman

The 2025 Federal Budget represents more than just fiscal housekeeping – it’s a statement of intent. Nowhere is that clearer than in the government’s unprecedented commitment to early childhood education, and the ripple effect it’s already having on Australia’s commercial property landscape.

As a commercial agent specialising in social infrastructure assets, I’ve seen the momentum building in the childcare space over the past 12 months. But this Budget marks a definitive shift – from sector growth to sector transformation.

Childcare: From Niche to Core

In the 12 months to March 2025, the childcare asset class recorded $1.001 billion in transaction volumes – a 30.3% increase year-on-year. Cap rates are compressing, now sitting at 5.0% nationally, with activity across Sydney, Melbourne, and Brisbane.

But while the eastern seaboard often dominates transaction headlines, the implications for Perth are just as significant – and arguably more compelling.

Western Australia is experiencing robust population growth, particularly in the zero to four age brackets.  As of March 2024, there were approximately 169,500 children under the age of four in WA, accounting for 5.7% of the state’s population. This demographic trend is fuelling demand for childcare places and setting the stage for further investment in centres across metro Perth.

A WA Benchmark: Maylands Sets the Standard

At Sterling Property, we recently brokered the $7.2 million sale of Nido Early School in Maylands – the largest individual childcare sale ever recorded in WA. That transaction reflected both the strength of the underlying lease covenant and the depth of buyer appetite for strategically located, well-operated centres.

The sale also illustrated the wider market narrative: even in a challenging macroeconomic environment, high-quality childcare assets in Perth continue to attract attention from private and institutional capital.

The 3-Day Guarantee: Driving Occupancy and Security

The Federal Government’s new “3 Day Guarantee”—a $426.6 million initiative to provide families with access to at least three days of subsidised care per weeks – a direct catalyst for occupancy growth and revenue stability. By replacing the activity test, it opens access to care for an estimated 100,000 additional families.

This will have a meaningful impact across Perth, particularly in middle-ring and growth corridor suburbs where demand continues to outpace supply.

Development Incentives: A Pipeline for Growth

To address supply constraints, the Budget includes a $1 billion Building Early Education Fund to support the development and expansion of centres, along with a $3.6 billion commitment to fund wage increases for early educators.

These supply-side measures are especially important in WA, where strategic landholdings and new housing estates continue to emerge across the metropolitan fringe. Government-backed development finance will be critical in unlocking new opportunities in areas where delivery timelines have previously stalled.

WA Momentum and the Institutional Shift

Private investors still dominate the childcare sector, but institutional momentum is building. We’re seeing increased interest from smaller REITs and funds that are actively seeking stable, government-aligned income streams.

The fact that Maylands drew national attention is telling. WA is no longer a secondary market – Perth’s childcare real estate is now firmly on the radar of sophisticated buyers seeking geographic diversification and yield compression opportunities outside the eastern capitals.

Quality and Compliance Will Set the Pace

The Budget’s focus on “quality early childhood education” also hints at future compliance reforms. This may introduce more rigorous standards and operational oversight, which in turn will create a value premium for best-in-class centres.

In WA, where planning and operational compliance is already well-developed, investors would do well to prioritise assets with demonstrated performance and proactive management strategies.

Final Thoughts

Childcare is no longer an emerging sector – it has arrived. With supportive policy settings, structural demand drivers, and increasingly sophisticated investor interest, Perth’s childcare property market stands out as one of the most strategically positioned asset classes in 2025.

For investors seeking stable income, future-ready infrastructure and policy-backed growth, now is the time to pay attention.

For enquiries about childcare assets or to explore investment opportunities, contact Sterling Property Partner Jake Wallman on 0403 975 298