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greatest benefit from them, we need to look at the speculative
and operational stages of a project first, because this is where
investors are most likely to come unstuck.
¿ FEASIBILITY AND PLANNING STAGES CARRY HIGH RISKS
Announcements regarding a new infrastructure project are
usually followed by housing price rises, such as the initial lift we
see in Figures 1 and 2, but the graphs also show how these
first price rises can stall and sometimes fall before a single sod of
earth is turned.
The rise in housing demand is purely speculative, caused by
investors jumping in early to secure low prices. The stakes for
loss are high because projects invariably suffer from changes
The history of announcements for new freeways, railways,
tunnels, ports or bridges is littered with amendments, delays
and abandonments as governments come and go, funds dry up
or priorities alter. A classic example is the Victorian Regional
Rail Link, which started as the Fast Rail Project way back in
2000, promising to drastically cut train times from Victoria’s
three major regional cities. The proposed reduction of travelling
time from Geelong to 45 minutes, Ballarat to 60 minutes and
Bendigo to 80 minutes was to bring residents in these cities
within commuting distance of Melbourne and started a round of
property speculation and development based on these outcomes.
It was a brilliant concept and promised to revolutionise regional
Victoria, but substantial modifications, cutbacks and delays
have dramatically changed the vision.
In fact, as Figure 3 shows, the average annual house price
growth of the three regional cities since the Regional Rail Link
project was announced has been lower than that of Melbourne.
¿ CONSTRUCTION STAGE PROVIDES THE MOST OPPORTUNITIES
The construction stage provides the greatest opportunities for
investors because of the high number of workers involved and
lack of suitable housing for them. These opportunities also carry
the least risk, because potential housing surpluses resulting from
completion of the project or property overdevelopment are years
away. Even so, infrastructure development projects in cities
and large urban centres play a very different role in changing
housing demand to those in regional or remote locations.
In large population centres there’s no rise in housing demand
at all, because the workers engaged on the project commute
from their existing homes in the city or town. In fact, reductions
in housing demand can occur because the noise, dust, pollution,
traffic congestion and delays go on for a number of years and
drive many local residents away, especially renters.
In regional areas there may not be enough skilled workers
on hand to undertake the construction project, so they must
be brought in and locally housed. Rental demand rises and
causes rents and rental yields to increase as well, leading to
higher investor interest. In theory, this in turn can result in
housing price rises as investors compete with each other to
In practice, however, the accommodation solutions adopted
by the construction companies and contractors can take a
number of forms with different effects on local housing markets.
They may compete with investors to purchase properties for
their employees to live in, directly putting upward pressure on
housing prices but none on rent demand. In other areas they
take out long leases to guarantee accommodation for their
employees, providing investors with high rent security but only
for a limited selection of properties.
They may also erect demountables to house drive-in, drive-
out or fly-in, fly-out workers rostered on duty so that there’s
no change to local rental demand, but the demand grows
elsewhere, in the areas where the workers and their families live
when not rostered on duty.
If none of these strategies are adopted by the construction
companies and if rental accommodation shortages become
acute, workers pay for board or lodging with local families, book
hotel rooms, motels, holiday cabins and even stay in caravan
parks. Sorting out this
confusing array of possibilities
isn’t difficult, because you can
easily research and track the
progress of large publically
funded infrastructure projects
on the National Infrastructure
Construction Schedule shown
in Figure 4.
With the National
Schedule at your fingertips,
the only question remaining
is where the construction
workers and their families
will reside and whether this
FIGURE 2: GLADSTONE’S HOUSING BOOM
2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
FIGURE 4: HOW TO TRACK PUBLICALLY
FUNDED INFRASTRUCTURE PROJECTS
The National Infrastructure Construction
Schedule is available online at
This free resource provides the following
information for each project:
> Full description.
> Type of industry.
> Federal, state or local government jurisdiction.
> Estimated total value.
> Current stage from feasibility, planning,
approval, being constructed to completed.
> Timeline from commencement to completion.
You can download full project data for any
infrastructure development project from
this site and follow any project on Twitter to
receive regular updates on progress.
FIGURE 3: REGIONAL CITIES COMPARED TO MELBOURNE
Average annual house price growth past 10 years
æHousing markets with the
greatest boom potential from
projects are those located near
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