Submarine suburbs surface as property market hotspots
The AUKUS submarine plan, which may cost Australia upwards of $300 billion over the next 30 years, will have an enormous impact on the property and rental markets of the suburbs that will house the new workforces.
When the costliest defence project in Australia’s history is focused on just a few coastal locations, a major impact on those local property and rental markets appears inevitable.
Australia will spend up to $368 billion by 2055 to build a new fleet of eight nuclear-propelled submarines, with construction taking place in Adelaide, Perth’s naval base in the south of the city undergoing massive expansion, and Port Kembla in Wollongong emerging as Defence's preferred location for a new east-coast submarine base.
Adelaide’s Osborne shipyards on the Lefevre Peninsula will triple in size as around $2 billion is spent in South Australia over the next four years to develop facilities to build the next-generation submarines.
It has been estimated that the AUKUS (Australia-United Kingdom-United States) deal announced this week could deliver, in total, more than 8,000 jobs in South Australia to build nuclear-powered submarines and key construction facilities over the next 30 years. The direct and indirect economic benefit to the state has been put at about $200 billion over the next few decades.
The Federal Government has secured land just north of the existing shipyard, where the future SSN-AUKUS vessels will be constructed. The submarines will be developed with the US and Britain, to enter service in the 2040s.
In Western Australia, around $8 billion will be spent expanding the HMAS Stirling naval base at Garden Island, just south of Perth, to service submarines during their operations.
The work is expected to support 3,000 workers, while 500 roles will be needed to uphold the base during rotations between 2027 and 2032.
The surge in employment is expected to have a major impact on property prices and rental vacancies and rents in areas surrounding these naval developments.
The main contributing factor to the significant price growth of the area is due to the demand from eastern states investors.
- Donna Gordin, Director, Home2Home (Rockingham)
Kate Smith, Principal and Director of Harcourts Smith, said the announcement that Australia’s next-generation nuclear-powered submarines will be built at Osborne would have a massive effect.
“We foresee a huge impact on the local property market due to the local submarine deal, as with the influx of jobs comes demand for local housing.
“The addition of the submarine deal ensures even more competition into the area, so securing a property within the Lefevre Peninsula and surrounding suburbs will be become more and more difficult.
“It will also be a huge boost for local infrastructure and business, once again adding value to surrounding property.”
Julian Coppini, CEO Project Marketing for property services company Oliver Hume, likened the defence deal to Adelaide’s reliable, diesel-powered land market going nuclear, with an expected AUKUS-driven employment and economic boom set to further underpin long-term confidence and growth in Australia's fifth-largest city.
“There is little doubt the recent announcement of the AUKUS submarine deal will provide a long-term benefit for the South Australian economy and property market.
“More certainty about the deal’s local benefits should also assist the local property market in dealing with any headwinds in the short term.”
Parm Singh, Principal of Wemark Real Estate, said demand for housing around the shipbuilding yards would increase but not immediately.
“Areas such as Port Adelaide, West Lakes, Kilburn, Gepps Cross, Mawson Lakes, and other suburbs close to Osborne will likely experience an increase in demand for housing as workers and their families seek to live near the new submarine-building facility and, as a result, there could be a rise in competition for properties, leading to potentially higher prices.
“Any impact on the local property market may take some time to be felt though, and may still be tempered by broader economic factors such as interest rates and overall market conditions,” Mr Singh said.
Jobs equal property price growth
The focus of the submarines deal in Western Australia is on Garden Island, the Royal Australian Navy’s largest fleet base. While public access to the island is largely limited, the nearby suburbs of Rockingham, Safety Bay, Waikiki and Shoalwater and inland to Baldivis will be the major beneficiaries of any influx of workers.
Donna Gordin, Director, Home2Home in Rockingham, said the submarine deal cements demand in the Rockingham and surrounding suburbs property market for years to come.
“We currently benefit from Navy personnel looking to live off-base, but also from those working in Henderson at the Marine Complex just 15 minutes to the north.
“It’s not just Defence personnel, this has a flow on effect to staff required to service the increase in population in the local retail and hospitality sector but also the workers required to build the infrastructure on Garden Island.”
When Australia’s new submarine stocks need an east coast berthing spot, it’s not yet certain where they will reside.
Australia will spend $10 billion on a new, east coast base to house the submarine fleet and while Brisbane and Newcastle are also shortlisted, the Illawarra town of Port Kembla, with its deep-water port, is widely acknowledged as the favourite despite the reservations expressed by some sections of the local population.
Robert Dimovski, Director, Dimosons Real Estate, said he felt the sentiment in the area was supportive of a new naval base, with more jobs, more people, and more foot traffic all better for local businesses.
“Port Kembla has already experienced significantly higher price increases since before Covid and capital growth will continue regardless of any external factors.”
Rental crisis a common thread for submarine suburbs
Housing a growing workforce has its benefits for locals whose property prices escalate and for investors capitalising on higher rental returns but for renters, the submarines could sink their prospects of finding a home anywhere near their workplace.
In the midst of a national rental crisis, the submarine suburbs’ rental markets are already taking on water, with each of them already experiencing a dire lack of rental stock and vacancy rates below 1 per cent.
Ms Gordin said Rockingham’s vacancy rate of around 0.5 per cent was already driving people even further south of the city.
“Our median rental price is $475 per week according to REIWA, still $60 a week less than the Perth median price of $535, but as affordability starts to bite, people are moving further south to get a cheaper rent.
“We are in desperate need of more construction to meet the current needs, let alone future needs of Defence personnel.”
Ms Gordin said redevelopment of a long-dilapidated old pub on prime foreshore land was believed to be connected to Defence plans to house workers.
“This project has provided an element of excitement to tidy up the beachfront but given this announcement, it’s hard to believe Defence Housing Australia sold the old caravan park site that was originally purchased to build a mix of defence homes.”
The imbalance of demand outstripping supply has attracted the attention of Sydney, Melbourne and Brisbane property investors, she added.
“Without a doubt, the main contributing factor to the significant price growth of the area is due to the demand from eastern states investors, either directly or via buyers agents.
“It started in October 2021 and hasn’t stopped, not a week, in fact, most weeks, not a day goes by without a call from a buyers agent chasing stock off-market.”
Mr Singh said the rental vacancy rate in north-western Adelaide was already at a chronically low 0.4 per cent and median rents had risen 35 per cent in a year.
“There’s increasing migration and limited supply of housing.
“If there were to be an influx of new workers and residents due to the submarine-building project and other developments in the area, it is possible that the rental market could become even tighter, potentially leading to higher rents and lower vacancy rates.”
But he also suggested the jobs boom could actually improve the levels of renter stock.
“There is already high levels of investor activity and the impact on the rental market would depend on various factors, including the pace and scale of new development, the size of the incoming workforce, and broader economic conditions.
“It's also possible that new construction in the north of Adelaide could help to increase the supply of rental properties in the area, helping to alleviate some of the pressure on the rental market because work sites will be easily accessible by the use of the northern expressway.”
Ms Smith said extended high density housing development would be needed to meet the required tenancy pool.
“The surrounding infrastructure would also need to follow suit, with the addition of local shops, cafes, parks, transport and traffic upgrades.”