INFRASTRUCTURE: Which is the most important to grow property prices?

In this how-to session I want to talk about infrastructure. But, more importantly, I want to talk about the essential ingredient you need in infrastructure that is going to grow property prices not only for the short term but for the long sustainable term.

Now you might be thinking, “That’s an easy one! Surely it’s got to be transportation… and truly it’s got to be mass transportation!” So we’re talking about trains, buses, trams, those types things… you’re wrong. What if you’re talking about, “Well, maybe it’s road infrastructure — big arterial roads that get people moving on mass into those locations.” Again, important, but not the essential building block. So maybe it’s education and housing and those types of things? Well, these things come later on, in fact! Other than the fundamentals of land and freshwater, the most important is infrastructure!

Infrastructure is the most important — it’s not even government infrastructure; it’s everything around that — it’s jobs infrastructure.

So think about it logically like this: when we bring a population together, we are normally bringing them into an area where there is good job infrastructure.

Now, job infrastructure is going to be things like commercial buildings, and then when you get the commercial buildings in, you move people there. You then get retail buildings. We also have to do commerce in that area so you’re going to have banking, in terms of an essential service needed in the area. You’re also going to have a logistics, movement of goods — so you’re going to have ports and this type of infrastructure. When you bring all these together, what you’re doing is creating a city infrastructure — an infrastructure that is complete jobs infrastructure.

Again, if you think about it logically: if I have that infrastructure there, as a business, I’m looking to potentially set up. If I don’t have that infrastructure there, it might be more cost-effective for me to grow my business in an area where the infrastructure is already in place as opposed to having the expense of building that infrastructure in a new location. So jobs infrastructure is absolutely critical when, basically, it comes to the foundational building blocks.

Why is this the case? Well, think about it logically: I mean, if I didn’t have that jobs infrastructure then, technically, I’d have less job opportunities. So it there’s no jobs … what do I do? I have to move. I need money, I need income; if I don’t have that income, I can’t borrow money and I can’t buy houses. All of the other infrastructure that we talked about — in terms of mass transport, education, social amenity, lifestyle amenity — they come later. They come after the jobs are created in that location.

So, the fundamental piece of infrastructure — their building block — is needed to be able to build out the demand level. Remember: property prices are driven by incomes, people’s ability to borrow money, sustain their employment to push demand up for housing in that area and gross property prices. So, the number one building block is actually jobs infrastructure. Everything else, in terms of all the building blocks of society, come from that transportation. Housing, shelter, all of those other pieces — education services, health; the whole lot — comes from that jobs infrastructure.

You don’t have the jobs there; you don’t have the population there. You don’t have pressure on property prices.

 

If you like this, make a comment below. Or, if you disagree, I’d also love to hear from you!