Vanessa De Groot 24 May 2022
‘Follow the infrastructure’ has long been a catch cry for residential real estate investors because it’s seen that infrastructure can have a big – and positive – impact on property markets.
The opportunities for investors to capitalise from infrastructure projects in Australia has recently grown, with the country going into an era where there will be much more, said Hotspotting director and founder Terry Ryder.
Post-COVID, governments all around Australia have been planning to invest in infrastructure to generate an economic recovery, with the impact on residential property expected to be “quite profound”, Mr Ryder explained.
“It’s a great strategy for property investors to follow the infrastructure trail – buy a property that lies in the path of progress and look at the big-ticket items that are being rolled out,” he said.
According to Simon Pressley, Propertyology head of research, not every infrastructure project positively impacts property values, but those that do are the ones that create operational jobs over the long-term and benefit the economy of the town or city where they are being built.
PropTrack economist Angus Moore said trying to time an investment in line with an infrastructure project was difficult.
“Investors should look at areas that best fit what they’re looking for, in terms of yields, affordability and pricing, and factor in potential improvements, including infrastructure,” he said.
Price rises from infrastructure aren’t reflected immediately but over time, and some areas could even be negatively impacted, Mr Moore added.
According to the experts, these are the top big-ticket infrastructure projects that could drive long-term property market growth in Australia.
Inland rail – Melbourne to Brisbane
Experts agree this $15 billion giant, which is one of the biggest infrastructure projects in Australia, is the number one project set to impact property markets over the long term.
The Inland Rail project is a 1700km freight rail line currently under construction and set to be completed in 2027.
It will connect Melbourne and Brisbane running inland via regional Victoria, New South Wales, and Queensland, covering 36 local government areas.
The project, which is described as “transforming how goods are moved around Australia”, is designed to fill in the missing links in Australia’s rail supply chain.
It will take trucks off roads and get goods to consumers faster and more reliably.
Inland rail is the biggest of the big-ticket infrastructure project that will directly impact property markets in Australia by an “absolute mile”, Mr Pressley said.
He said it would significantly benefit towns including Albury, Armadale, Toowoomba, Wagga, Parkes, Dubbo, and Beaudesert, with the biggest benefit to property markets being post-construction.
That is when more jobs are created through food manufacturing, logistics, and warehousing, with local businesses to benefit from all the extra activity in their towns, he said.
Inland rail will have an impact on economic activity and create jobs locally, which will have a flow on effect to the property market by creating demand for real estate, Mr Ryder added.
“A big project like that has multiple impacts – when it is being built if creates a lot of economic activity and jobs, with local businesses getting contracts and people coming to work on the construction.
“There will be new people coming into the areas where it’s being built, and they’re probably going to need somewhere to rent. It just generally pumps up the property market.
“Then when it’s finished it’s going to bring more commerce to the places that have stops along the way as businesses will want to set up in those places.
“This will include places like Parkes, which is already a very important regional centre of New South Wales, as well as Moree, Narramine, Narrabri, and once it gets into Queensland, Toowoomba.”
Mr Ryder said the biggest impact of the Inland Rail project would be in Toowoomba because there was a big transport hub planned for the city, right next to the airport on the western fringe.
“Suddenly, Toowoomba has become the place that investors all over the country want to buy property in, and there have been some big increases of around over 20% in the past 12 months.”
Western Sydney International Airport and surrounds
This $5.3 billion airport at Badgerys Creek is under construction and expected to be completed by 2026.
The project itself is expected to generate economic activity and support almost 28,000 direct and indirect jobs by 2031, but there is also a planned 11,200ha Aerotropolis surrounding it, which will further boost the area with an estimated 200,000 new jobs.
The Aerotropolis will be an economic hub for industries including aerospace and defence, manufacturing, healthcare, freight and logistics, agribusiness, education, and research.
Other infrastructure projects in Western Sydney include transport links such as the $11 billion Sydney Metro – Western Sydney Airport rail line.
“There’s a lot more happening infrastructure-wise in western Sydney,” Mr Ryder said.
“It’s one of the most dynamic economies in the country – but really, the big-ticket item is the airport and everything else it creates around it.”
He said the relatively affordable property markets in the local government areas surrounding Badgerys Creek, including Liverpool, Blacktown, and Penrith would all get an uplift from the infrastructure project.
“There is going to be lots of jobs during construction and also through the operation of it, and not just in the airport itself but in the commercial industrial businesses that want to be close to the airport.
“People want to live close to where they work so we’re going to see demand for housing in these local government areas.”
Being such a big project, the Western Sydney Airport will really open up western Sydney and draw more people into the area, PRD chief economist Dr Diaswati Mardiasmo said.
“The main thing is that it will attract more people into the area, and they will need some sort of place to live, whether a rental or to buy a property,” Dr Mardiasmo.
She said the high demand would lead to property price growth, particularly with the housing supply chain lagging.
Hells Gates Dam, North Queensland
The Commonwealth has committed $5.4 billion in funding to build the Hells Gates Dam, subject to approval of the final business case.
The 2,100 gigalitre dam is considered to be transformative for North Queensland – it will boost the economy by facilitating 60,000 hectares of new land for irrigated agriculture, doubling crop production regionally and increasing annual agricultural output by $800 million.
Located in the Upper Burdekin catchment west of Townsville and north of Charters Towers, it will make Burdekin Basin a major food bowl of Australia.
While the project is yet to get the final go ahead, and may not start for at least four years, it is estimated it will could 10,600 construction jobs and 3,300 ongoing jobs.
It will also add an estimated $6 billion in revenue per year to the North Queensland economy, according to Mr Pressley.
“Townsville and Cairns are the major centres that will benefit from it but there are other smaller communities including Innisfail, Tully, Charters Towers that will be impacted.”
Queen’s Wharf, Brisbane
This $3.6 billion integrated resort development in the Brisbane CBD is currently under construction and due to be completed by the middle of next year.
Covering more than 12ha of the city’s CBD, the project will include four luxury hotels, three residential towers, the equivalent of more than 12 football fields of public space, a new pedestrian bridge linking to South Bank, high-end retail space, a casino, and eateries.
It will employ 8000 people when completed, which is when Brisbane’s property market will see the biggest benefit, as it will put the city on Australia’s tourism map and place upward pressure on prices due to greater demand, Mr Pressley said.
“Whilst Brisbane is Australia’s third biggest city, it doesn’t have a visitor economy – it’s not a place that people typically go for a holiday,” he said.
“Queen’s Wharf is probably equivalent to the Crown precinct at South Bank in Melbourne – it’s a destination.
“There will be plenty of people in the cooler months of the year that will now say ‘let’s go to Brisbane, they’ve got that new major entertainment precinct there’. “So, for the first time in Brisbane’s nearly 200-year history, it is going to develop a visitor economy.”
2032 Olympic Games, southeast Queensland
The big-ticket infrastructure project to come out of Brisbane hosting the Olympics in 10 years’ time is the $1 billion redevelopment of the Gabba stadium in the suburb of Woolloongabba, which would host the opening and closing ceremonies as well as the athletics.
Brisbane’s $5.4 billion Cross River Rail project, which is a new 10.2 kilometre rail line running from Dutton Park in the city’s inner south to Bowen Hills in the inner north, will see the Woolloongabba station precinct transformed into a mixed-use hub, with a new pedestrian plaza linking the stadium to the new train station.
Aside from the Gabba redevelopment, there will be plenty of infrastructure spending to come in association with the Games in Brisbane, the Gold Coast, and the Sunshine Coast including the upgrading of sporting facilities and transport links, and investment in the hospitality sector, Mr Ryder said.
He said the boom in these areas would happen before the Games.
“Research indicates from other cities that have hosted the Olympics, the locations that will have the biggest growth in house prices are those that are close to main venues.
“By that logic investors should target suburbs that are close to Woolloongabba, including East Brisbane, Annerley, and Woolloongabba itself, that could be expected to get uplift from proximity to the Olympic action.”
Mr Ryder said the Commonwealth Games had a huge impact on the Gold Coast in the lead-up to 2018, with infrastructure fast-tracked, and the same would happen in southeast Queensland ahead of the Olympics.
“The Olympics is so much bigger than the Commonwealth Games – the infrastructure spend these events necessitate is huge for residential property.”
Alternative energy projects, various locations around Australia
There is a huge boom in the construction of alternative energy projects around Australia, which will impact markets around the country, Mr Ryder said.
“There are literally dozens and dozens of large-scale solar farms, wind farms, and hydrogen energy projects under construction and in planning,” he said.
“It’s collectively tens and tens of billions of dollars.”
Mr Ryder said the NSW Government had created renewable energy zones, and the New England region, including Tamworth and Armidale, was one area being pumped up by this infrastructure spending.
“It’s really giving areas that perhaps have economies that have been fragile an extra string to their economic bow to give them diversity and strength.”
One of the biggest renewable energy projects in NSW currently is the $1 billion Yarrabee Solar Farm in Morundah in the Murray region, which is expected to start construction this year, requiring up to 600 workers.
Meanwhile a $1.6 billion solar farm and battery project known as the Merriwa Energy Hub is proposed near Merriwa in the Hunter Valley region of NSW. It is expected to be one of the largest renewable energy hubs in Australia, and could create 500 jobs.
Dr Mardiasmo said renewable energy projects were fairly new, with the past year or so seeing a massive injection in funding for projects.
For the markets in which they are located, there will be a new industry and job creation, which will be a drawcard for people to move to the area, and in turn, higher demand for property in that area, she said.
There would be a flow-on effect with more services required including hospitality, she added, which would further boost the economy.
When will property markets see a boost from infrastructure projects?
The evidence shows that over time there can be several boosts to real estate markets due to an infrastructure project, said Mr Ryder.
Typically it is when is it announced and when construction starts, but sometimes there can also be a boost on completion, he added.
“That might apply to a new motorway for example, in an area that has become more accessible because of the construction,” he said.