Key takeaways
- Major infrastructure upgrades are frequently associated with strong demand in local markets, as property investors often seek locations with infrastructure developments in the pipeline.
- So how do infrastructure developments unlock future capital growth?
- With state-funded projects scheduled across Australia, infrastructure projects can provide attractive opportunities for property investors.
What is infrastructure?
Infrastructure provides essential services that drive economic growth, employment and productivity, and can be classified into three main categories;
- Utilities: electricity, gas, communications and water
- Transport: airports, roads, and rail
- Social: schools, hospitals and community facilities
Why is infrastructure important to investors?
There is historical evidence to suggest that new infrastructure projects boost the local economy by creating new jobs and attracting more people to a precinct. Not only do infrastructure projects increase employment and local property values, but they also provide indirect benefits to the community such as consumer expenditure and social benefits of community development-- all of which drive demand.
This is why property investors should take an active interest in reviewing both current and planned infrastructure projects within different markets.
In particular, road upgrades and developments play a critical role in driving up property values, as these projects make areas more accessible. A freeway extension can reduce the time it takes to drive between a regional town and a major city, making that town a more attractive area to live in and thus raise prices.
A new public hospital in a suburb adds jobs, brings in more visitors and increases demand for housing in the area, driving prices up.
Are some infrastructure projects better than others?
When determining the importance of an infrastructure project, you should consider the size and scale of the project to identify whether it's likely to have an impact on demand or supply within the area.
The nature of the project and type of infrastructure project is also critical. For instance, an airport may be more beneficial to property investors compared to a roadwork construction, as an airport will provide sustained employment and demand beyond the construction period. While a new highway or road work is valuable, it won’t create employment once the project is completed.
What about the timing of infrastructure projects?
Some property investors buy into an area during the hype of a current infrastructure project, but a good time to invest in a market with planned infrastructure is once the tender has been placed and the project has been confirmed to go ahead.
Frequently asked questions
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