How to Identify Real Estate Hotspots #01: Identify Transport Infrastructure

By August 11, 2017Buying, Investing

In all of our biggest cities, transport infrastructure is an ongoing issue. Roads, tunnels, bridges, busways, rail connections.

This is especially true in Sydney, Melbourne and Brisbane, but it’s also happening in Adelaide and Perth. It’s in the news almost every day. Sydney has big problems dealing with its traffic congestion and the problems of its public transport system.

Melbourne has issues too. Brisbane and South East Queensland constantly plays catch-up, trying to keep up with population growth. Recently completed in Brisbane are the Ipswich Motorway upgrade, duplication of the Gateway Bridge, the Clem Jones Tunnel, Airport Link, rail links to Springfield and to Redcliffe, and various busways. Other multi-billion-dollar projects are in planning.

Various State Governments have gone billions of dollars into debt, borrowing big to fund new infrastructure, of which the biggest expense by far is Transport Infrastructure. The Federal Government also directs considerable resources to transport infrastructure.

Why do we care?

Because a new motorway, rail connection or bridge can revolutionise property markets. A suburb that was 90 minutes drive from the CBD can be brought 20 or 30 minutes closer by the opening of a new freeway – and suddenly have far greater appeal for home buyers.

The Gateway Bridge and motorway gave suburbs both sides of the Brisbane River much faster access, including to the Gold Coast and the Sunshine Coast. The opening of the eight-lane Pacific Motorway between Brisbane and Gold Coast had a huge impact on residential property in the northern reaches of the
Gold Coast, because getting to the Brisbane CBD became faster – plus there was also a new fast rail connection.

The WestLink system in Sydney is important, because it connects three motorways. The EastLink motorway in Melbourne has also had a big impact. It has affected property values, both with industrial and residential property.

In 2015 and 2016 there were major new announcements of transport infrastructure projects, including new motorways and new or extended rail links in all our major cities. Sydney and Melbourne are both spending multiple billions of dollars on their road and rail networks.

The extensions of the Kwinana Freeway south from central Perth have been instrumental in generating capital gains for property in areas like Mandurah, which became one of the biggest growth areas in Australia.

Locations which have had price booms due to (or partly due to) new Transport Infrastructure:

  • Mandurah, Western Australia
  • Ipswich City, Queensland
  • Blacktown, New South Wales
  • Geelong, Victoria

The extension of rail links to those areas and the construction of the Mandurah Bypass enhanced the process.

The Geelong Ring Road brought major benefits to property owners south of Melbourne. The $5 billion Regional Rail Link, which opened in September 2015, has reduced commuting time to Melbourne from Geelong, Ballarat and Bendigo.

Hotspotting research shows that city suburbs with commuter train links generally have higher capital growth rates than those without train services.
For any investor thinking of capitalizing on the Transport Infrastructure influence, it’s important to be aware of this factor: there are usually three waves of increases in property values. The first comes when government makes the initial announcement of plans for a new road. The second comes when they start construction. And the third happens around completion of the project, when people can see tangible evidence of the effects of the new infrastructure.

So you make the biggest gains if you buy early, as soon as the new road (or tunnel or rail line) is announced. But be warned: Transport Infrastructure is a popular political football and governments often announce big projects as an election approaches and forget about them later.

In addition, Transport Infrastructure can result in problems rather than benefits, especially for properties too close to the new facility. So there can be risks if investors take a punt and buy property because of political talk of a new transport project.

But if you get it right, you can make lots of money.

Find this article useful to you?

The next article in this series is How to Identify Real Estate Hotspots #02: The Ugly Duckling syndrome

This is a joint publication of Snowden Parkes and Ryder Property Research.

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