24 June 2014 — Want to pick the next property hotspot? According to Terry Ryder, a director of property market specialist Hotspotting, looking for areas with good public transport, renewable energy and general sustainability infrastructure is not a bad place to start.
For example new rail projects at Brisbane’s Redcliffe Peninsula and the City of Onkaparinga on Adelaide’s outskirts have driven stronger prices, Ryder says. And Adelaide, with its renewable energy projects, education and health is a city that investors could well be paying more attention to.
According to Ryder the impact of the decline in the uranium mining and manufacturing sectors in Adelaide has been overstated and the bigger picture is far brighter, especially in the resource sector, such as iron ore.
“It still doesn’t have the economic oomph of Queensland or Western Australia, but it is very underrated as a property market,” he says.
“The [economic benefit] of the renewable energy industry as well tends to be overlooked. Adelaide is also quite prominent in the education economy”.
Affordability is another strength, with Ryder saying it’s possible to buy two houses in Adelaide for the price of one in Sydney.
“It is the most affordable mainland city. Sales are rising very strongly, which will eventually become price rises. Right now in terms of the property cycle it is in the midway point so investors can look forward to price rises.”
Rail in Seaford shifts the dynamic
Seaford in particular was showing strong growth, since the rail link to central Adelaide commenced operation in February of this year.
“Seaford is a leading population growth centre. It is by the seaside, it is near the wine district, and it has land for new estates. It ranks as the number one property market in Adelaide.”
In his Top Ten Supercharged Infrastructure Hotspots Report the research also shows Aldinga Beach and Port Willunga are set to take off, with a rail link promised between the outer urban areas and the Adelaide CBD. There is also work underway to upgrade the Southern Expressway, which will improve commuting times.
Redcliffe gets connected at last
At Redcliffe, Queensland, the rail link with the Brisbane CBD, which will resolve the peninsula’s relative isolation, has been on the promises list for decades. Now that it is actually underway, with Thiess signing the construction contract in November 2013, the market is responding.
Public transport creates value
Ryder says that research carried out by his firm in Sydney, Brisbane, Melbourne and Perth show that suburbs with rail projects had the highest capital growth rates, much more so than suburbs where buses were the main form of public transport. This is because people prefer to be on a train or tram than on a full bus in the middle of peak hour traffic, he says.
“Councils prefer the buses as they are so much cheaper to put in. But trying to convince people to use buses is quite a difficult marketing exercise.”
The point of lower risk return
Ryder says there are three phases at which the market responds to a major transport infrastructure announcement.
“There is a spurt when it is announced, then a second spurt when it starts, then a third when it is actually happening and operational and you can touch it.”
While investing at the first stage generally brings the highest returns in terms of increases to land values, it is also the highest risk phase, as many Perth developers discovered when the City Link Light Rail project was put on hold.
“The problem is that governments have a habit of announcing things in the lead up to an election, and then walking away afterwards,” Ryder says.
“There is more reason for optimism when a project starts construction, as these projects never start and then stop before completion. That is the phase which has the lowest risk to return ratio [for development].”
Roads are not a long-term answer, but TODS are the way of the future
While major road projects such as Westconnex in Sydney are contributing to market activity in Blacktown, Liverpool and Westemead, Ryder says, “building more and more bigger freeways is not a long-term answer”.
In terms of a more sustainable urban fabric, rail and light rail are the long-term winners, he says.
“It has to go that way, and you see things happen at a higher density around rail. Transport oriented developments are one of the ways of the future.
“The south west of Sydney is another example of this. A rail link will make a major difference. Public transport is part of the picture of Parramatta really succeeding.”
Social infrastructure part of the mix
Social infrastructure is also stimulating the market in Adelaide, and in other hot spots including Blacktown, Liverpool and Westmead in Sydney; Sunshine and Casey in Melbourne; and Kelvin Grove in Brisbane.
And co-location points a light in Parramatta
Ryder says Parramatta is a good example of the tendency for health and education services to co-locate and, where they are also serviced by public transport, can create a vibrant, diverse and economically sound community.
“The thing I like about education and medical is in terms of jobs, compared with mining and road building; there are more jobs in the ongoing operation than the construction. With mining and road building, the jobs end.
“There is also a lot of demand for rental accommodation in these areas. Those types of social infrastructure projects are very important.”
However, sustainability in housing is not influencing the overall market, Ryder says, and it’s still coming low down the list of priorities compared with location and transport access.