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Big spend doesn’t always mean big gain

Big spend doesn’t always mean big gain

 

While Perth’s massive infrastructure investment program is creating a raft of opportunities for property investors, those new projects won’t necessarily boost local house values according to a new report from Momentum Wealth.

The Western Australian state government has allocated $7.7 billion to key public infrastructure projects over the next four years, with a focus on road, rail and place-making projects.

The spin-off for property investors is that public spending on infrastructure projects can lead to upwards pressure on property prices thanks to increased amenity and greater demand.

However, Momentum Wealth’s new research reveals that these projects won’t necessarily deliver higher capital growth for property investors.

It’s simplistic to assume, the report states, that big-ticket infrastructure projects will significantly boost local property prices when in reality the capital growth might only be at market rate.

“The research report explains that the construction of large-scale football stadiums, such as the $1 billion Perth Stadium for example, typically deliver negligible price growth for nearby residential properties,” Momentum Wealth managing director Damian Collins says.

Alternatively, smaller infrastructure projects, such as the $24 million HBF Arena Upgrade in Joondalup in Perth’s north, can prove to be much more beneficial for investors.

“As noted in our research report, these types of community projects can deliver better capital growth prospects because they’re more likely to bring tangible benefits to the area, such as additional amenity and upgraded streetscapes,” Collins explains.

The report also highlights that investors need to consider less-obvious locations that are likely to benefit from new infrastructure, as these may make better investment locations.

The $49 million Ellenbrook Rapid Bus Transit System, for example, will benefit residents on Perth’s northeast urban fringe, specifically Ellenbrook and Aveley, through improved accessibility. However, the Momentum Wealth research reveals that the infrastructure will also help to support Morley, in Perth’s inner-metropolitan ring.

“The research report explains that Morley represents a much smarter investment location because it’s significantly closer to the Perth CBD, the supply-side fundamentals are more favourable and it has been identified by the state government as a key suburban activity centre,” Collins says.

“While new public infrastructure projects can be a good indicator for future residential property price growth, investors need to be aware that they’re not necessarily a silver bullet for instant price growth.”

As such, investors need to take a broader view when making investment decisions.

“Other property price drivers, such as housing demand and supply, demographic shifts, private investment and changing structure plans… also need to be taken into account when buying an investment property.”

The WA Government is currently undertaking a once-in-a-generation infrastructure investment program that aims to enhance Perth’s useability and liveability as the city’s population grows to 3.5 million residents.

About API

Founded in 1997, API is Australia's highest-selling property magazine.

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