Infrastructure spend is just another clue

When major infrastructure upgrades are in the pipeline, property investors take notice. Areas set for improvements in transport, utilities and community facilities are sought after by investors, because public spending on infrastructure often drives up property demand and value.

But the formula isn’t always that simple. Spending on infrastructure in one area may not generate the same capital growth as the same expenditure in another area. One area may become a hot-spot within a boosted local economy; another with identical investment won’t have the same flow-on impacts.

In our decades of buying properties, we’ve found that areas with an existing baseline of infrastructure are likely to generate strong growth when new infrastructure is underway. For example, Geelong and Frankston existed as stand-alone hubs with established transport and community facilities before new roads generated a boost in liveability (and hence, demand and value).

On the other hand, similar expenditure on roads to new housing developments in similar proximities to Melbourne haven’t generated much growth, because these areas’ overall liveability and demand remain below those of established areas that offer schools, shopping centres, rail, hospitals and other community facilities.

As always, a complex of interplaying factors generate healthy yields and healthy capital growth.

Until next week,

Jock Bing