What’s the big deal about infrastructure – Part 1

© Property Professor articles — www.thepropertyprofessor.net.au.
Reproduced with permission.

We hear a lot about infrastructure and its impact on property but what does it all mean and is bigger always better?

There are many different types of infrastructure such as roads, bridges, trains, hospitals, universities, mines, etc. but in this article, I am going to explain the impact of infrastructure using just two real life examples.

In my home state of South Australia, there are two major projects proposed for the Yorke Peninsula. One is the Ceres wind farm which is a $1.3 billion project. The other is the Rex Minerals Hillside copper mine which will cost $900 million.

Just by looking at the numbers, you would think that the Ceres wind farm would have a larger impact as it is a more expensive project at $1.3 billion whereas the Hillside mine is only $900 million.

The first thing you need to remember is that the prices quoted for projects such as these are generally their construction costs; it is not necessarily what they are worth.

In each case, it will take approximately 1,000 construction workers to build each project. You would be right in thinking that a total of 2,000 workers could have a significant impact on property. However in each case, the construction workers will be housed in purpose built camps on site, away from any towns or populated settlements. As there won’t be any extra demand for established or new homes from the total of 2,000 construction workers, there won’t be any pressure on prices to increase, based on the construction of these two major projects.

I can hear you ask “What happens when the construction phase is over?” I’m glad you asked!

Once construction is over, each project will go into the operational phase. Once the almost 200 wind turbines are up and running, the $1.3 billion Ceres wind farm will need a grand total of 50 people to operate and maintain it.

However, the copper mine will need far more workers. At this stage, the peak workforce for the Hillside mine is projected to be 650. In both cases, the workers will not be housed in a mining camp. The majority of them will need to find accommodation in and around Ardrossan, the closest major town to both projects.

I think you would agree that a project that will employ up to 650 people is going to have a far greater impact on the demand (and subsequently, the price) of property than a project that employs only 50 workers.

Next time you hear an announcement of a major project, don’t just focus on how much it will cost to build. If you want to gauge the likely impact it will have on property, you need to ask yourself a few questions including;

• How many workers will be needed in the construction phase?
• How many workers will be needed in the operational phase?
• Where will these workers live?

It is people (requiring accommodation in existing or new housing) that will affect property prices in these types of infrastructure projects; not the cost of a project.

As mentioned earlier, there are many different types of infrastructure. I have only used two examples of major projects. Transit infrastructure such as roads, rail and bridges has an impact on property prices for different reasons and I will explain this in my next article.

Happy House Hunting!

Written by Peter Koulizos, university property lecturer, author and buyers advocate.

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