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Home Success Money

John McGrath

Real Estate Expert

How Local Property Markets Could Benefit from Federal Budget Infrastructure Spend

Reading Time: 4 minutes
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Infrastructure was a key focus of last week’s Federal Budget, with a long list of shovel-ready projects across every state and territory receiving funding. There was also an extension of the First Home Loan Deposit Scheme, with an extra 10,000 guarantees released but only for new home purchases.

Major new infrastructure has a direct impact on local home values. The bigger the project, the better. In major congested cities like Sydney, if the project enables a faster commute to the CBD, that will impact prices significantly. Think new train lines, light rail or brand new roads.

Other big projects such as major upgrades to existing roads or new bridges might not excite the market as much but they do boost home values slowly, starting with an influx of workers seeking rental accommodation.

Here’s what typically happens to local property markets when major projects begin.

Firstly, they create hundreds if not thousands of jobs. Workers come from all over and many will choose to relocate nearby, especially if the project is in a regional area and/or is going to take a few years.

As weekly rents rise due to this new demand, investors take notice and this can lead to more buying activity. Workers who rent initially might then buy, encouraged by rising local values. All this fresh new buying activity raises home values for existing owners, who can simply sit back and watch.

When a major infrastructure project is finished and the benefits are actually seen and experienced by people, it can bring more buyers into the area, raising demand and prices further.

The Budget provides an extra $10 billion, primarily for new projects, on top of the Federal Government’s existing 10-year plan to invest $100 billion in new infrastructure nationwide.

More funding was allocated last week under the 10-year plan, including $1.8 billion for the Western Sydney Airport Metro line.

Here is a list of the new projects included in the $10 billion boost in last week’s Budget.

New projects in NSW (supporting 8,000 jobs)

– Ettamogah Rail Hub (ERH) near Albury

– Sydney Road upgrades for the Prospect Highway at Western Sydney, Heathcote Road from Hammondville to Voyager Point and the M1 North Smart Motorway from the ANZAC Bridge to Warringah Freeway

– Hogbin Drive, Coffs Harbour Airport Freight Access

– The Singleton Bypass on the New England Highway & the Newcastle Inner City Bypass from Rankin Park to Jesmond

– Various Newell Highway upgrades, including the Dubbo Bridge and Parkes Bypass

– Northern NSW Inland Port at Narrabri

– Planning for a fast rail link between Sydney and Newcastle

New projects in Victoria (supporting 3,850 jobs)

– Pedestrian improvements in Arthurs Seat on the Mornington Peninsula

– Road upgrades for Barwon Heads; Hall Road at Cranbourne; North Road at Narre Warren; the Western Port Highway; and South Road in Moorabbin

– Rail Line upgrades including Stage 3 of the Shepparton line and Stage 2 of the Warrnambool line

– Work on the Western Rail Plan, which includes two new lines to Melton and Wyndham Vale; increased capacity between Sunshine and Melbourne; and faster travel on the Geelong and Ballarat lines

New projects in Queensland (supporting 5,150 jobs)

– Beams Road Open Level Crossing at Carseldine

– Various upgrades to the Bruce Highway and Brisbane River Centenary Bridge

– Stage 1 of the Coomera Connector road (Coomera to Nerang)

– Currumbin Creek Road-Bienvenue Drive intersection upgrade in Currumbin Waters

– M1 Pacific Motorway upgrade program for Exit 45

– Stage 2 of Riverway Drive in Townsville

– Upgrades to the Cooktown to Weipa Corridor and Townsville to Roma Corridor, as well as the Mt Lindesay Highway at Jimboomba

– Cairns to Northern Territory Border upgrade

New projects in Canberra (supporting 400 jobs)

– Canberra – South West Corridor upgrade package

– Molonglo River Bridge

– Planning and design for the Parkes Way upgrade

Turning to first home buyers, the Budget provides an extra 10,000 places under the First Home Loan Deposit Scheme but it’s for new homes only. They’re calling it the ‘New Home Guarantee’ and these places are available now until June 30, 2021.   

They’ve targeted new homes to support the construction industry, which makes up about 5% of our national GDP and employs about 1,150,000 people, according to the Bureau of Statistics.

The price caps for capital cities and major regional centres have been raised from $700,000 to $950,000 in Sydney; from $600,000 to $850,000 in Melbourne; from $475,000 to $650,000 in Brisbane; and from $500,000 to $600,000 in Canberra.

All of these types of incentives are great but I do encourage first home buyers to think long term and avoid being speculative in purchasing decisions.

Buy in a location you actually want to live in that has good local amenities, such as shops, cafes and transport to the CBD. Take advantage of the lowest mortgage rates ever and buy above the suburb median if you can, as this means you’ll get an above average property with desirable elements, such as a north aspect, which help maximise price growth.

The views expressed in this article are an opinion only and readers should rely on their independent advice in relation to such matters

The article originally appeared on mcgrath.com.au – for more information including articles, checklists, guides and more visit McGrath’s Insights Centre

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