How will high speed rail impact housing affordability?

High speed rail

Once again, the idea of high speed rail is being floated as a solution to Australia’s affordability woes. What could it do to property prices?

High speed rail seems to be one of those political carrots that gets dangled any time an election approaches. Politicians like to woo voters with the promise of a rail network connecting major cities with regional areas. Most recently, Prime Minister Malcolm Turnbull, along with Liberal backbencher John Alexander, floated the idea of a high speed rail link running from Melbourne to Brisbane. At an estimated cost of between $60 billion and $114 billion, Alexander said the hypothetical rail link would ease pressure on Australia’s capital cities.

“Building high-speed rail terminals on farming land adjacent to these cities will increase population and commercial activity, expanding townships without damaging existing amenity. This growth will help rebalance our ­nation’s settlement and act as a release valve on overly congested major cities. And as quality housing will be available at a fraction of big city prices, costs of living will ultimately fall,” Alexander wrote in an opinion piece for The Australian.

Mortgage Choice chief executive John Flavell agrees, and says a lack of infrastructure is a major factor putting pressure on housing affordability.

“In terms of housing affordability, the reality of the situation is that in Australia we have some of the highest rates of urbanisation of anywhere on the globe, and we all flock to the capital cities for the opportunities they afford us. In absence of sophisticated high speed travel linkages, the problem just heaps on top of itself,” Flavell tells finder.com.au.

Flavell points to other countries where high speed rail has alleviated population pressures on major cities and allowed commuters to move to further-flung satellite areas.

“If you look at other nations where they want to take advantage of open space - and in Australia we’ve got a lot of it - high speed rail networks can make a big difference. Just look at the United Kingdom. I can be at Paddington Station in the centre of London, and an hour later I can be amid rolling fields in Gloucestershire. That changes the dynamic in terms of people’s willingness and ability to live in remote areas,” he says.

Allowing people to live outside the capital cities wouldn’t just ease pressure on the capitals, Adelaide Bank general manager of third party mortgages Damian Percy tells finder.com.au. It would also have potential flow-on effects that could benefit regional areas, and see their economies delivered a boost as populations swell.

“Anything that provides an alternative to living directly adjacent to the main cities is good. People would either be more comfortable in commuting and living farther out, or there’s the circular effect where a larger population in those areas means jobs get attracted to the areas themselves,” Percy says. “As long as there are jobs and amenities, or jobs and amenities can be easily accessed, people will live outside the obvious areas.”

High speed rail

While high speed rail could take the pressure off the capital cities, could it begin to transfer the housing affordability problem to regional centres instead? Flavell says it’s inevitable that as regional centres become more attractive and commuting from the areas becomes more feasible, property values will rise.

“If you look at places like the Gold Coast, rail links can make a material difference in terms of prices. If I know I don’t have to live in Brisbane but can get to work effectively and efficiently if I get on the train at Robina, it does push up property prices.”

Alexander has suggested that prices in regional areas could skyrocket, a development he’s painted as enormously positive.

"You will push up prices enormously around Goulburn, people will be delighted," Alexander told Fairfax.

There’s certainly evidence to suggest that major infrastructure projects have a positive impact on property prices, but while Flavell agrees prices would rise, he says it’s unlikely such a rise would be as dramatic as the rises spurred by increased urban density in Australia’s capitals.

“It does not push them up to the extent as it would to continue to heap pressure on urban centres,” he says.

Percy agrees, and says regional centres will be much more nimble in adapting to demand, which is likely to keep house prices in the areas from growing out of control.

“If we were working on the principle that there would be an increase in demand without a matching increase in supply, then yes. The difference is unlike Sydney, where there are a range of constraints that preclude the city expanding, when it comes to putting people into Newcastle or Wollongong or Bendigo or Ballarat, there’s no shortage of land in those places,” he says. “Those places want more population. They want more people. There might be a modest increase, but the ability of the market to react to that is much greater in the second tier cities.”

Ultimately, high speed rail might be one answer to Australia’s housing affordability problem. However, those looking to rail links as a panacea are likely to be disappointed, Percy says.

“It’s not one cohort or characteristic that’s driving prices up. There’s negative gearing and supply constraints and problems with infill development, along with infrastructure. Fixing one won’t bring house prices down, but fixing a number of them would,” he says.

Percy does concede, though, that anything taking pressure off Australia’s major urban centres is desirable.

Of course, the real obstacle to high speed rail easing housing affordability is the likelihood of the infrastructure ever actually being put in place. Percy is sceptical that the latest announcement brings Australia any closer to high speed rail becoming a reality.

“I think you can set your watch by the Very Fast Train press releases. Everyone likes trains, and if you’ve ever ridden on one they’re incredibly cool. They’re also very expensive. I think politicians like the idea of them more than they like the idea of paying for them,” Percy says.

And Flavell argues that time and effort could first be put into improving the already-existing rail networks.

“If you look at people on the Central Coast or Wollongong who commute to Sydney, they will use the rail network, but the rail network is slow and it’s not a quality product, so the appeal diminishes,” he says.

Percy echoes this sentiment, saying most commuters would be happy just to see more modest improvements to public transportation.

“Most commuters would prefer a somewhat fast train before a Very Fast Train. I think they’d settle for a fast enough train.”

Proposed stopCurrent median house price
Melbourne$621,000
Shepparton$251,500
Albury-Wodonga$450,000
Wagga Wagga$382,500
Canberra$621,000
Southern Highlands$743,750
Sydney$910,000
Central Coast$371,250
Newcastle$486,000
Taree$255,000
Port Macquarie$478,777
Coffs Harbour$414,000
Grafton$278,500
Casino$223,750
Gold Coast$538,000
Brisbane$499,800

Sources: CoreLogic RP Data, ABS, APM

Adam Smith

Adam has more than five years of experience writing about the Australian home loan market.

Was this content helpful to you? No  Yes

Related Posts

Ask a Question

You are about to post a question on finder.com.au

  • Do not enter personal information (eg. surname, phone number, bank details) as your question will be made public
  • finder.com.au is a financial comparison and information service, not a bank or product provider
  • We cannot provide you with personal advice or recommendations
  • Your answer might already be waiting – check previous questions below to see if yours has already been asked

Disclaimer: At finder.com.au we provide factual information and general advice. Before you make any decision about a product read the Product Disclosure Statement and consider your own circumstances to decide whether it is appropriate for you.
Rates and fees mentioned in comments are correct at the time of publication.
By submitting this question you agree to the finder.com.au privacy policy, receive follow up emails related to finder.com.au and to create a user account where further replies to your questions will be sent.

Ask a question
feedback