State-by-state: where property prices will be driven by infrastructure projects
Australia is in the middle of an infrastructure boom that is driving capital growth in property markets around Australia but knowing which projects deliver property investment value is essential.
After decades of underinvestment, state governments have bet large on the social and economic impact of infrastructure spending.
Australia is in the middle of an infrastructure boom, with the Federal government’s Infrastructure Market Capacity report saying the pipeline has grown by $15 billion in the last 12 months.
But there’s another aspect that interests investors: the impacts of infrastructure on property prices.
The macro property price effect
Before we even look at the local effects, it’s important to note infrastructure can have a significant impact on the wider economy.
Nearly all projects require construction and good paying jobs for tradespeople.
It also delivers a pipeline of work for businesses as varied as electrical parts suppliers, heavy vehicle sales, consultants and urban planners.
You can see the economic boost in the 2019 federal budget papers, which revealed 37 per cent of Australia’s growth could be slated back to infrastructure undertaken by the NSW and Victorian governments.
Big ticket projects can influence house price movements in nearby locations.
It does this by improving the appeal of these areas, helping draw in more buyers and supporting greater price increases than similar suburbs that aren’t impacted.
Some infrastructure also attracts more renters to a location, driving competition for homes and increasing rents.
What infrastructure projects are likely to have an impact?
If you are looking for a quick way to characterise the projects most likely to influence local property prices, I have always used the model of the great, the good and the indifferent.
The indifferent include projects like the upgrading of the electricity grid to accommodate renewable power. While it’s a worthy project, it won’t have any localised impacts on property.
The best examples of “the good” include major health centre upgrades or civic rejuvenation projects. They’re good primarily because they attract more workers to a location, especially renters.
The great are some (note some) transport projects. The right projects can transform an area, driving a gentrification process that can last for a decade or more.
The infrastructure boosts on the cards in your state
Victoria will spend around $85 billion on infrastructure over the next four years.
The standout for local property prices is the Melbourne Metro Tunnel, scheduled to open in September 2024. Arguably the best transport addition in Victoria in 40 years, it will be a boon for property prices around some of the new stations, especially Arden (North Melbourne).
There are also several new motorways, including the West Gate Tunnel and the North East Link tunnel. For investors, these are examples of “the indifferent”; unlikely to have any impact on local house price growth.
Investors should note major expansions of health facilities not only draw in workers as renters and home buyers, but also a host of supporting businesses who also need staff.
New South Wales
New South Wales is planning to spend more than $110 billion on infrastructure.
The biggest is the massive WestConnex motorway, connecting central Sydney with the west and southwest. While it promises faster travel times, motorways rarely deliver this over time so you can mark this down as indifferent.
Across in the good camp is Western Sydney Airport and a new rail line connecting to the central Sydney.
International airports are great for creating employment but their impact can take quite some time - up to a decade - when they have to compete with established airports in major cities.
The state’s infrastructure budget is around $19 billion but most of this is dedicated to planned or projects underway.
They fall into two major camps: motorways and arterial roads, such as the North- South Corridor, and health additions such as the Women’s and Children's Hospital.
The road projects fall into the indifferent camp while suburbs next to new or expanded healthcare facilities outside the CBD, like Flinders Medical Centre, should provide support for nearby locations, like Sturt and Bellevue Heights.
Queensland will spend $38 billion on infrastructure over the next four years.
As you would expect, there are projects associated with the Brisbane Olympic and Paralympic Games in 2032. They’ll be great for construction jobs but are unlikely to have any real impact on local prices.
Perhaps the most interesting project is Brisbane Metro Transit. This will employ 60 electric bi-articulated vehicles using existing bus lanes and stations, but also a new tunnel underneath Adelaide Street and the removal of car traffic from Victoria Bridge.
New bus routes tend to have a lower impact than rail connections but if this one lives up to its promises, it may spur some above-market movement in underserviced suburbs.
The Queen’s Wharf development is another one to watch, as successful civic rejuvenation projects can nudge surrounding suburbs into the good camp.
Western Australia will spend $34 billion on infrastructure over the next four years.
The biggest and most impactful is Metronet, 72 kilometres of new rail lines, 23 new stations and a host of upgrades.
The bottom line
If you’re interested in investing in property, new infrastructure can prove a decisive factor but don’t fall for the “growth corridor” or “urban renewal” slogans bandied about by some.
Instead, only incorporate “great” infrastructure projects into your thinking.
Better yet, get some qualified advice before taking the plunge.