What’s the big deal about infrastructure – Part 2

In Part 1, I illustrated the impact of infrastructure on property prices using an example of a wind farm and copper mine.

In Part 2, I will outline that impact that transit infrastructure such as roads, rail and bridges can have on property prices.

Bridges can have an impact on property prices, based on where they are situated. Just imagine the effect on property prices if the Sydney Harbour Bridge was located 3km further downstream. Would the business district of the North Shore be located where it is now, North Sydney? Would North Sydney residential and commercial property prices be as expensive? I don’t think so.

Bridges obviously bring together two locations separated by water but they also have the effect of concentrating business activity. Where there is a concentration of business activity, you will also find demand for residential property in adjacent areas as most people like to live close to work.

A new train line can have a major impact on property prices for two reasons. Firstly, it can markedly reduce travelling times between locations. Secondly, the positioning of train stations is vital.

There is not much point in living next to a train line and having to put up with all the noise, vibrations and possibly air pollution if the nearest train station is kilometres away. Living near a train station is very advantageous as you can get on and off the train easily and avoid most of the traffic jams that cars and bus commuters encounter. In major cities such as Sydney, Melbourne and Brisbane where traffic can be a nightmare, train infrastructure is important. However, in smaller cities such as Adelaide where the traffic is not as congested and it is easier to get around in a car, new rail infrastructure and train stations don’t have as much impact.

New roads such as freeways and highways can have the biggest impact on property prices. Its effect on property prices can be greater than train infrastructure because far more people use roads than rail. Only about 10% of the population regularly use public transport such as buses and trains. What do the other 90% do? They use the road system as they drive their cars, ride their bikes or walk.

However, not all roads are the same. Toll roads are not as popular as freeways/highways where no toll is payable. This is also true of bridges and tunnels, depending on the location of the free alternative. Commuters may be happy to pay a toll to use the Sydney Harbour Bridge or Tunnel because the alternative route where no toll is payable is several kilometres downstream at the Gladesville Bridge.

Where alternate routes are close by and only marginally reduce travelling time, they are less likely to be used.

If you want to take advantage of new infrastructure to accelerate your capital growth, you need to remember a few things.

Firstly, it is where the new transit infrastructure starts and finishes that will potentially have the greatest impact on property prices.

When it comes to rail, proximity to train stations is very important. Finally, exit and entry ramps are localities you should also consider if you wish to take advantage of new road infrastructure.

Happy House Hunting!

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

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