One of the first generalisations you learn when it comes to assessing real estate is the closer you are to the city, the higher the price will be. Whilst it may be a sweeping statement with data proving the rule has many exceptions, it simply outlines what inspires one buyer to value a location over another in terms of monetary value – and that’s time.
Time is of the Essence
The time it takes to travel from A to B is the most important consideration for today’s property buyers rather than the exact kilometer distance from the CBD. If a buyer is able to travel to work, the footy and any other ‘lifestyle’ amenity on the priority list within a 30-40 minute period, the desirability factor increases greatly and when it comes down to it, you can ‘value’ a building any which way you like, but in the end it’s only worth what a purchaser will pay. Unless you get the time factor right, demand is always going to be marginal, and for most people there is no choice but to stick to established areas. If they do dare to venture out into ‘never never’ land, they face endless hours sitting in peak time traffic and a vague dream of the Government’s ‘proposed promise’ of a train service.
We’re currently going through this in Victoria, where aside from the abundance of poorly designed high-rise apartments popping up in the CBD, fringe growth is back on the agenda. The State Government has released plans for 6 new suburbs and 12 new train stations. If you’re a first home buyer reading that as a headline it sounds fantastic! However from the ’12 new train stations’ ‘proposed’ only 2 have had funding approved. The rest –the Government are ‘hoping’– will be part funded by developers along with additional infrastructure all ‘compensated’ with tax rebate. However guess who’s going to end up paying if the developers agree to the above proposal (which I doubt will happen)? The home buyer of course – it will all be added on to the already inflated prices!
Infrastructure Must Play Catch Up
When buying residential real estate, the ‘real’ commodity a home buyer will purchase is the lifestyle on offer. Dwellers don’t live in houses so much as they live in ‘communities’. Therefore, building even more houses on the outskirts of our cities, is not the be all and end all for Australia’s population growth – albeit, it’s a vitally important component if we’re to ease inflation in the already stretched and strained established inner and middle ring suburbs. Regardless of this, unless planning includes the other considerations I’ve outlined above, the new housing market risks long periods of stagnation in-between the various Government ‘incentives’ on offer.
Numbers of existing train lines were promised ‘upgrades’ years ago – Mornington and Melton for example have plans pending to be ‘electrified’, however once again, some 20 years later, residents have long lost faith it will happen. Yet residents move into newer suburbs with the ‘promises’ tinkling in their minds. “Buy in” now – and once the train line has been established, the schools built, the ‘leisure’ facilities created – land value will rise and investment potential increase. Haven’t we gathered enough evidence by now that promises made by successive governments come with a small printed disclaimer stating *unless notified otherwise, this promise will expire within 24 hours.
Incentives Lure Buyers to the ‘Burbs
Thus far, most first home buyer schemes have focused on sweeping incentives which cover established real estate as well as ‘new homes.’ Property advocates have long argued how essential it is to scrap incentives for established dwellings and if grants are needed at all – use them to fuel new growth. We don’t need incentives to encourage the purchase of established real estate as the desirability factor is there already.
In the recent NSW budget, it was a welcome change to see all ‘incentives’ pushed into ‘new’ homes. The shortage of property in NSW is greater than that of some other states, so encouraging additional supply has been broadly welcomed by all. However, you’ve got to have some sympathy for the first home buyers who do venture out buoyed on by the incentives because planning in the outer suburban estates has been woefully unsuccessful principally for the reason I stated at the beginning of this article. Time! Grants and incentives may produce a ‘wave’ of growth in the newer suburbs, but as soon as the lifestyle – or lack of such – bites and grants are once again withdrawn, the market will stagnate and we’ll be back to square one.
If there’s no money set aside to build the needed amenities alongside the residential dwellings at the start of the project, you’ll always need to introduce incentives to encourage home buyers to make the move. It’s not the distance from the CBD – it’s the time. Buyers could accept outer suburban living a lot more readily if they were able to commute within a reasonable time frame and demand would go up naturally without the need for a ‘sweetener’.