New and recently completed infrastructure projects are without a doubt a key factor in driving up the value of existing houses in suburbs right around Australia. But how infrastructure impacts the property market is often misunderstood by novice investment ‘gurus’ and other property investors.
Projects that create long term employment are a positive for the market, but projects that don’t create jobs are not going to have any sustainable impact. This is why road construction or mining activities that are a short-term play will not have a strong or sustainable flow on effect.
Many market spectators, or speculators also get too caught up in projects that are proposed, or just a business case and make half a million dollar property decisions on projects that may just be a political talking point and never come to fruition.
Anna Porter, valuer, property commentator and Suburbanite CEO has taken a look into the areas with new infrastructure that will help continue to drive property prices, and she sorts the impactful projects from the ones that may just be a flash in the pan.
“Adelaide is the benchmark example of projects that are a catalyst for underpinning a robust and sustainable property market. The projects coming out of Adelaide are creating jobs as well as encouraging people to move to the area to set down roots, which is set to boost internal migration to the very liveable city,” says Porter.
“These projects such as the hospital will not only create jobs internally but there is a flow on effect to the businesses outside of the hospital such as cleaning companies, cafes, florists and the general supply chain to the hospital. This will create spending in the local economy as well and a thriving economy will result in a thriving property market. “says Porter.
“The Royal Adelaide $2.4 billion hospital is now open and the city is already reaping the benefits of jobs coming out of this project. The next major project, being the defence contract for manufacture and maintenance of military boats out of Port Adelaide will be kicking off, as well as the recent announcement by Lionsgate that they will be adding another 1200 jobs to the former Holden site with renewed manufacturing activities in batteries and other innovative sectors,” says Porter.
“Adelaide is set to see thousands of new jobs which will underpin employment, financial security, cash flow into the economy and in turn the property market.”
“Contrary to Adelaide, Tasmania has put forward a number of projects as a concept or proposal but so far very few are set to turn soil. Some property commentators or speculators are putting all their eggs in the Hobart basket, but this is considered fraught with danger,” warns Porter.
“The Hobart and greater Tasmanian market has seen a strong 12 months growth off the back of investors entering that market but the fundamentals are certainly lacking, such as migration and job creation. The research shows that for every 5 people that move to Tasmania in the next 3 years, only 1 job will be created. This is fundamentally concerning for the property market and we expect to see it have a big impact on that market in the next 2 years,”
“This is in-line with past employment drivers for the area withjobs growth from Aug 2017 to Aug 2018 being only 2,600 jobs, which only represents a 1.06% increase on the total. Average jobs growth for Australia was 2.47%, meaning Hobart significantly underperformed over this time and based on the research this will continue to occur into the next 3-5 years based on the proposed pipeline,” says Ms Porter.
The state pipeline paper(project summary below) shows that upcoming projects are only sitting at a 30% conversion rate of the proposed pipeline. Out of the 10 projects tabled only 3 have been approved for construction and the rest remain as business cases that will likely remain a political talking point.
“Projects that are getting through the gate keeper are still not what we want to see for a filter down effect into the property market. Such as Battery Of The Nation which includes windfarms and solar initiatives are also not significant job creators for the long term and the flow on effect to the property market will be minimal,” concludes Porter.
“It’s the second airport Sydney has been waiting for and it’s finally coming. With the land acquisitions essentially complete, the future of South West Sydney is starting to take shape,” says Porter
“This project is a massive employment driver for the south-western Sydney area which is currently the fastest growing region in Sydney. The new aerotropolis precinct will attract significant industrial, commercial and retail developments which will in turn drive population and income growth,
“We don’t expect to see housing price growth to filter through immediately though as this is a long-term project that isn’t expected to be complete for some time yet. Couple that with the affordability crunch in Sydney holding values back for the next few years, and we expect this project to set up the markets to watch for the next boom in 5-7 years being Paramatta and Liverpool as the major players off the back of this new development.”
“This growth could be hindered by Federal and state parliamentary plans to reduce the number of overseas migrants arriving into Sydney given 70% of the population growth in Sydney is reported to be from overseas migrants.”
“The aerotropolis precinct will also boost the growth in surrounding suburbs including Liverpool, Greater Penrith and Cambelltown-Marcarthur, all projected to become satellite cities. Gone are the days where students needed to travel for universities – now these western Sydney hubs are seeing universities anchoring their presence and also partnering with local hospitals to facilitate health and education opportunities in these locations.”
“The health and education boost will see the Nepean Hospital receive a $550 million upgrade, the Campbelltown hospital receive a $632 million upgrade and the University of Wollongong cementing a Liverpool campus.”
“The RAAF Heavy Air Lift Group and Australian Army Special Forces will find their home bases here which will increase the presence of defence personnel and their respective families in the region, thus likely to take up available housing stock in the surrounding suburbs.”
“Most commentators have eyes on the $710 Mil metro light rail project, but this is not the most valuable project to Canberra in terms of a flow on effect to the property market,” says Porter.
“Whilst Canberra is in need of a good public transport link and this will certainly provide that, there is not a significant number of jobs coming out of this project or population boost to the area,’
“The projects that are more notable include the Canberra U-Public Hospital and Defence Academy, both will attract jobs or students which is a boost to the economy and population capture,” explains Ms Porter.
University of Canberra Public Hospital is currently under construction at the university campus in Bruce. The $212 million state-of-the-art teaching hospital will be capable of accommodating 140 patients, as well as an additional 75 day places and outpatient support. The hospital will help support Belconnen’s growing population, as well as provide a number of jobs for the local economy.
Australian Defence Force Academy near the University of New South Wales Campus recently underwent major redevelopments and upgrades to draw in a new range of students and cadets. Additionally, UNSW is considering establishing a second Canberra campus in Reid, which could potentially attract an additional 10,000 students to the city.
Melbourne North-East Link
“While the Melbourne CBD is currently sprawling with high-rise and an oversupply of units, a number of property speculators are tipping the transport projects will help this market turn a corner and underpin continued growth of the housing market. But this just isn’t the case. Again, we have a number of great project that are simply a flash in the pan for jobs and economic growth to the area.”
“The $16b railway project known as the North East Link will improve congestion in and around the city and between north Melbourne, increasing the liveability outside of the CBD but certainly won’t be a game changer for the residential real estate market,” Says Porter.
“This is the same with the Melbourne rail infrastructure, whilst the area is set to benefit from the other improvements such as the Ring Rail, which will provide Melburnians with a second metro line, this isn’t the catalyst for housing growth in the immediate future.”