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Why the promise of infrastructure is not enough

Over the next five years, there are nearly $240 billion worth of major public infrastructure projects under way around the country.

Now, these projects will be at varying levels of completion at any given point in time, but they are ones that are actually happening.

Alas, the same can’t be said for a plethora of other projects, which looked like they were a sure thing but may be unlikely to see the light of day anytime soon.

Infrastructure spending

When the Federal Government wanted to slash spending last year, it pulled out its red pen and instantly killed off a large number of major infrastructure projects.

In fact, more than 50 projects worth a staggering $11.6 billion had their promise of funding pulled… just like that.

Amongst the casualties were 17 projects in New South Wales, 12 in Victoria, nine in Queensland, five each in Western Australia and South Australia, and one each in Tasmania and the ACT.

Most of the axed projects were major transport infrastructure such as new ring roads, new highways, new train stations, new bypasses, and even the proposed fast train to Geelong from Melbourne.

The truth of the matter is major infrastructure is bloody expensive, hence the word “major” with regular cost blow-outs in the billions of dollars quite common.

And, when governments want to slash spending in a high inflationary environment, then they generally cut from the biggest expenses first, which are generally mega infrastructure projects.

Of course, major infrastructure changes the way we live in our cities and regional areas, often by providing much-needed transport options or new hospitals and medical facilities. 

They are all part and parcel of living in a country where our population is rising rapidly and with it so does our eternal need for more infrastructure. 

Chicken or egg?


When it comes to significant infrastructure, though, which one comes first? People or planning?

Well, while I’m sure there are smarter folk than me who make these decisions, often it is a situation where the chicken (population growth and demand) has to happen before the egg (new infrastructure).

This is usually the case in in our capital cities which are always evolving and changing as our populations do, too.

But sometimes the promise of new infrastructure takes so long, or doesn’t even eventuate at all, that homebuyers and investors who had purchased in specific locations – often on city fringes – based on these promises are left paying the price via inferior capital growth and cash flow.

That’s not to say that buying a home or investment property in affordable outer-ring suburbs doesn’t make financial sense. Rather, it means that a new piece of shiny major infrastructure – which may or may not happen – must always be a nice-to-have reason at best, amongst the myriad reasons why you should purchase in a specific location.

This is particularly the case in burgeoning new communities, springing up on a variety of city-fringe areas, where transport options have been previously lacking and where solid investment properties can still be found.

In those areas, as the local population grows, there will no doubt be new transport infrastructure constructed, such as train lines or rail links, at some point in the future, which will be very nice indeed.

But in the meantime, savvy homebuyers and investors can circumvent any potential transport issues by purchasing a house with a double lock-up garage and off-street parking. Then it really doesn’t matter how long it takes for the infrastructure to arrive.

The most educated property buyers recognise the value of new infrastructure on their real estate assets, but they don’t rely on it so heavily that it drowns out all of the other factors that must inform their strategic property purchasing decisions.

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