Sydney's new airport at Badgerys Creek will be a double-edged sword for investors
Already the questions are streaming in: how will the new Sydney airport impact on property markets?
Will Badgerys Creek make Penrith become a boom town? Will Liverpool surge? Where should I buy to benefit?
Many issues are evident here. One is that investors are constantly trawling for opportunities and for events that will be game-changers. Some are looking for shortcuts to wealth and see an announcement like Badgerys Creek as the door to a rapid windfall, if they can zero in on the best places to invest.
Another issue is about risk in real estate. And another addresses the elements that generate out-performance in real estate investment.
Let’s take the last issue first. There’s no doubt infrastructure is the biggest creator of real estate wealth. New infrastructure is the ultimate game-changer.
And the most influential is transport infrastructure.
I suspect more people will waste money buying in haste than make money by getting it right.
Hotspotting research shows that suburbs with commuter train stations have higher capital growth rates than those without. A new motorway or bridge can revolutionise the appeal of a location by making it more accessible. The intersection of two motorways is a magnet to warehousing and logistics real estate – and other forms of property spin off it, including residential.
The thing about a major new international airport is that it’s a double-edged sword, it can create problems as well as opportunities. Property under the flight path may suffer while others will benefit from the economy generated by the facility.
It’s similar with a commuter train station: the ideal is to be within walking distance but not so close as to suffer from the noise and the traffic.
The most direct real estate beneficiaries of a new airport are outside the residential sphere. A new airport creates, firstly, demand for hotels and secondly, for warehousing and other light industrial property.
Residential is an indirect beneficiary because an international airport creates a new economy with tens of thousands of jobs, and people like to live close to their work.
But perhaps the core issue is risk. When a project like Badgerys Creek is announced, lots of people dash about looking for ways to make a killing from buying strategic real estate. But the airport may never happen. This is the ultimate political football and there will much upheaval along the road to construction. Plans for a second Sydney airport have been talked about for close to 50 years. The Prime Minister’s announcement does not make this a certainty.
If it does happen, Badgerys Creek won’t be reality for maybe 10 years – although the Prime Minister hopes construction will start in 2016. But before that can happen, big issues need to be sorted, including funding, road and rail links, project partners and the issues of noise and flight paths.
Long-term, the impact of a new airport at Badgerys Creek would be enormous. Short-term, many investors will expend considerable energy trying to find out how best to turn the federal government’s decision into a personal windfall.
Many will feel they need to act urgently or they’ll miss a major opportunity. My advice is to take a cold shower, settle down and watch what happens.
I suspect more people will waste money buying in haste than make money by getting it right.