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How Infrastructure Projects Can Push Up Property Prices

Train line heading into the horizonIt’s no secret that house prices are continuing to rise across Australia and it’s not just in the capital cities.

Although a lack of supply coupled with the significant growth in our population are major reasons for this exponential growth, infrastructure projects announced by the state or federal government can really turbo charge property prices in any given area.

It’s as if your location is being renovated, the value of your property goes up and, the best part is, you don’t have to pay for any of it! Of course, the costs will be covered by your taxes but the potential pay-off is worth it.

Now, it’s tempting to just go out and buy property in a suburb where a project has been planned but be careful. The following tips can help you on your way.

What’s happening in your suburb?

Have a good look in and around the suburb or part of the city in which you currently reside. Similarly, do the same for the suburb you want to purchase property in:

  • Are there signs of unemployment?
  • Is there a lack of culture?
  • Is there overdevelopment?

Any infrastructure plans that affect these characteristics of a suburb will have the greatest impact on house prices.

Transport projects

There a number of different types of infrastructure projects that can really help to kick-start a sense of culture, safety and job opportunities in an area.

What usually connects all three is having solid transport facilities in place. For example, building an expressway or train line between an outlying suburb and a central business district (CBD) can drastically reduce the time taken to reach each location. This means a greater opportunity for work and business, thus, more salaries and a greater number of people needing homes along the transit way.

The main types of transport projects that are likely to push property prices up are anything to do with:

  • Light rail: In 2012, the New South Wales (NSW) Government began the extension of the Inner West Light Rail line and announced the $1.6 billion CBD and South East Light Rail project.
  • Heavy rail: The Victorian Government recently announced plans to allocate $24 billion to be invested in new road and rail projects, including $830 million for the “Melbourne Rail Link” which is scheduled to open in 2023.
  • Roads and motorways: South Australia’s Northern Connector is an as-yet unfunded integrated freight rail and multi-lane motorway which would connect Port Wakefield, the Barossa and the Riverland to the Port of Adelaide or Old Noarlunga. Keep watching this space.
  • Bus transit ways: The BaT (bus and train) Tunnel is a proposed 5.4 kilometre tunnel that would connect Dutton Park to Spring Hill in Brisbane, easing current congestion problems that are plaguing the area.

Job creation

In areas where unemployment or lack of job opportunities are an issue, keep an eye out for any infrastructure proposals relating but not limited to the following:

  • Airports: After literally decades of debate, the Federal Government finally confirmed in April this year that the site of Sydney’s second airport will be built at Badgerys Creek in the city’s west. It estimates that 4,000 jobs will be created in the construction phase; 35,000 with the development of the airport by 2035; and 60,000 by 2060.
  • Mining: The proposed McPhillamys gold mine project near Orange is expected to generate 150 new jobs and 500 if the project is kick-started as planned by 2016. For more information on upcoming projects, check out Mining Australia and scroll down to the map entitled ‘Planned and proposed projects in Australia (as of November 2013)’.
  • The construction or expansion of ports: In April 2013, a $110 million funding package was announced to progress the Port of Hastings expansion in Victoria. This project is still subject to planning approvals and no schedule for completion has been announced.

Urban renewal

The revitalisation of an urban centre may at first appear to be purely cosmetic but it can have a massive effect on areas that previously lacked culture or lifestyle traits.

These government or council projects are usually designed to build on the strengths of the existing cultural backgrounds of the residents; to breathe new life into previously under-used and dilapidated areas; and, overall, meet the needs of the residents.

It’s important to remember as well that the needs of residents can evolve and completely transform as the make-up of the community changes over time.

A current example is Sydney’s “second CBD”, Parramatta, which has been identified as an area for urban renewal under the UrbanGrowth NSW project. With the city boasting a growing population and greater job and business opportunities, the project aims to create a mixed-use precinct in Parramatta North, including housing and employment opportunities.

You can see the effects of urban renewal in suburbs like Newtown, which transformed from a working class, farming suburb to the “hip” area it is today. It’s a suburb filled with coffee shops, boutique galleries, op-shops and pubs with live music, just to name a few.

Urban renewal goes hand-in-hand with gentrification but the process can be difficult to identify. Of course, any urban renewal projects in the works are usually a good sign of potential property growth. Getting into a suburb at the tipping point of gentrification process is an absolute gold mine!

A proposal is not a plan!

Generally speaking, property prices initially spike when the infrastructure project is first announced – everyone wants a slice of the action!

Trying to capitalise on the basis of the announcement can be risky because at the stage of the announcement, it is usually only a proposal which means it is still subject to planning changes and sometimes even the need to find the funding to complete the development in the first place!

The NSW Government’s North West Rail Link project is a prime example of things not going to “plan”.

The project was originally proposed in 1998 and later cancelled and re-announced based on a different proposal by a new state government. Thankfully for anyone who bought property in the area in the last year or two, major tunnelling work began earlier this year.

The next phase of property growth is when the infrastructure is actually in place and working and the benefits of the development can be clearly seen.

How to find out about infrastructure projects

Firstly, keep an eye on the media. Again, take any reports with a grain of salt and follow up these announcements and commentary by checking with the planning and infrastructure departments of your relevant state website.

The National Infrastructure Construction Schedule is a great guide to understanding the major projects currently underway across the country. Keep in mind not all of them will have a direct impact on the value of your property.

Some projects will be smaller or still in the pipeline so get in touch with your local council for more information.

Above all, use your head too and try to identify the positive changes going on in the suburb. It may be that the demographics are changing, the lower income residents are moving out and young professionals are moving in.

Do you need some help? Our mortgage brokers will be happy to speak with you.

Many of them are successful property investors in their own right and know from experience what infrastructure projects will have the greatest impact on property values.

Call us on 1300 889 743 or complete our free assessment form today!