Budgetary spending has positive implications for real-estate

The Victorian State and Federal Governments announced the 2009-10 budgets in May, both revealing positive implications for residential real estate in Victoria.

Government spending policy has played a significant role in the buoyancy of the Australian economy during the last 12 months. Property expert and WBP Property Group CEO, Greville Pabst, remarks, “initiatives such as the FHOG Boost have created a floor under property values and positively stimulated consumer activity and sentiment.”

Underpinned by capital spending on infrastructure, both budgetary policies are devised to further sustain the Australian economy by supporting jobs and industry. However, despite the obvious implications for the Victorian economy, Pabst reveals the “multibillion dollar projects will also have a significant positive impact on real estate values.”

Pabst continues, saying, “property values are seen to reveal a direct correlation with major infrastructure spending. In particular, new infrastructure projects such as train stations, highways and road expansions or extensions often expose a suburb or regional town to increased demand from buyers, resulting in a positive movement in property values. The development of a new road or rail project quite often reduces travel time and increases convenience to the user, therefore opening and making available suburbs and areas that are more affordable.”

According to Pabst, recently completed road projects including EastLink, the Deer Park Bypass and the Geelong Ring Road, confirm this trend. “When construction on EastLink started in March 2005 property values saw a sharp rise followed by strong medium term growth. Despite current decline in the property market, EastLink suburbs such as Blackburn, Dandenong, Mitcham and Frankston have grown by more than 25%. At the height of the market many of the suburbs in this corridor had grown in excess of 40%. Similarly, Deer Park Bypass and Geelong Ring Road suburbs have witnessed significant growth during the last few years, well above the Melbourne median growth trend.”

The announcement of several proposed major road projects to be funded by state and federal budgets comes as part of Victoria’s 12 year, $38 billion Victorian Transport Plan. The biggest investment in transportation in the state’s history, the project is aimed at delivering the best transport system in Australia. Proposed major infrastructure plans to be funded by budgetary expenditure include the North East Link; a major connection between the Metropolitan Ring Road at Greensborough and the Eastern Freeway at Bulleen; and the Regional Rail Link project, a major new line running from West Werribee to Sunshine and then through to Southern Cross Station.

“Both of these projects have major implications for property prices in areas located near the respective infrastructure developments. If approved, the North East Link will improve access to and from suburbs including Bundoora, Greensborough, Watsonia, Macleod, Rosanna, Heidelberg and Bulleen. Already underway, the $3.2 billion Regional Rail Link project will result in considerable improvement to train line services from regional Victoria areas including Geelong, Ballarat and Bendigo as well as increasing capacity and alleviating congestion on metropolitan train services,” says Pabst.

“Evidence of the link between infrastructure developments and property prices indicates that these areas are likely to benefit from significant increase in property values, representing good investment opportunities for the savvy buyer,” concludes Pabst.