By Russell McKinnon | 12 Jun 2015

Property analyst Urbis predicts that Badgerys Creek landowners will see land values in the surrounding area significantly spiking above trend once construction of the proposed airport actually commences in earnest, but not necessarily beforehand.

Urbis Valuation and Advisory Director, Russell McKinnon, presented a report on Western Sydney land value growth: cause and effect of infrastructure at a recent Australian Property Institute Young Property Professionals event, showing that the construction of major transport infrastructure within a benefitting area that did not previously enjoy an element of same may boost land values 20 per cent to 30 per cent.

Urbis undertook a study of Sydney’s M7 Motorway and Melbourne’s EastLink, looking at the trend of industrial land value growth for each over a 20-year period between 1993 and 2012 overlayed against a timeline of urban planning, property market and economic events.

In the case of the M7 Motorway, Mr McKinnon said that whilst the general route of the motorway and its future proximity to existing western Sydney industrial areas was known pre-Olympics, land values in those benefitting areas spiked strongly once future planning controls were exhibited and ratified (1998 to 2000) and again when construction actually started (2003).

Upon operation of the motorway in late 2005 the industrial land value growth in the location steadied so as to trend with the wider Sydney industrial market, eventually providing for an overall industrial land value bounce of 21 per cent over the period.

Graph 1

It appears a similar story for industrial land in Melbourne’s east, with the Eastlink tollway providing a land value increase benefit of approximately 26 per cent – but only after the infrastructure opened in 2008 for operations.  Mr McKinnon noted that in Melbourne’s east there historically have been a number of arterial road options for industry before EastLink hence an element of infrastructure existed and the tollway needed to demonstrate its efficiencies.

graph 2

“Where benefitting catchments have had limited, or no access to similar infrastructure previously – the growth is higher and earlier with the bounce coming off a lower land value base” Mr McKinnon said.

However, Mr McKinnon says that there is the likelihood of no appreciable change in land values and rates of capital growth in situations where new infrastructure is introduced into established areas where a reasonable level of infrastructure already exists.

In this context Sydney’s Lane Cove Tunnel was also analysed by Urbis using a catchment of residential properties having the ability to use the infrastructure and its feeder roads, and a nearby urban area that didn’t.  Both property baskets experienced similar capital growth and cycles over the analysis period, with the infrastructure benefit outcome being inconclusive.

“So with the M7 example we predict those areas immediately around Sydney’s future second airport, where there is currently only modest infrastructure, will experience greatest land value growth once the planning certainty is delivered and construction is underway.  Therefore initially there may be a slow start to surrounding land value escalation, but changing in 2017 and fully evident by 2020.”

Please click here to download a copy of the complete presentation