6 January 2020

What Will Sydney’s Light Rail Do for Property Values?

Adrian Atelj
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The Sydney Light Rail (CBD and South East) and Inner West light rail have been topics of much debate for years. Now the focus of these projects is shifting to property values and what impact the light rail will have on the corridors in which they operate.

Studies from PRDNationwide have found that properties in close proximity to transport – specifically rail-based transport options – are valued at around 3% more than dwellings without direct access to this type of transport.

In addition, the London School of Economics devised a model that highlights the fact that accessibility to employment prospects (i.e. transport infrastructure) automatically increases the value of a property by between 0.25 and 0.3%.

To that end, Sydney’s new light rail system has been devised with a view to bringing about an increase in community wellbeing and engagement, creating jobs and boosting economic development. Representing significant bonuses, the light rail will reduce pollution and traffic congestion – and should see an upswing in property values.

But, with the NSW Government’s massive investment in the light rail network, what impact will we really see in the real estate market?

CASE STUDY: INNER WEST LIGHT RAIL

The inner west light rail included the development of 9 new stops between Lyilyfield and Dulwich Hill. It was completed in 2014 and has greatly improved livability in the area as well as connecting people to where they live and work and offering additional modes of transport that reduce the need for vehicle ownership.

According to YourInvestmentProperty, before construction of the Dulwich Hill to Lilyfield light rail extension was launched, the median house price in Dulwich Hill was $820,000. On commencement of operations in 2014, the median price had jumped to $1.1 million, and in 2019 grew to $1.475 million with annual capital growth recorded at 8.12%.

This spike in property values was echoed across other suburbs in which the light rail operates. A great example of this is Lilyfield, which now has a median house price of $1.65 million after an incredible increase of nearly 82% over the last five years since the Inner West Light Rail has been in operation.

This kind of increase is well above market expectations and could be a viable predictor of how much property values can increase due to the light rail infrastructure.

CBD AND SOUTH EAST LIGHT RAIL

The CBD and South East Light Rail is a new, state of the art rail network for Sydney with services now operating between Circular Quay and Randwick and additional stops between Moore Park and Kingsford at Nine Ways in the works for early this year.

It was predicted in 2018 that Sydney’s new light rail project would see the property value of nearby apartments increase by up to 20% according to Greencliff Realty and, if anything, this may have been a conservative estimate. For example, in Randwick, housing prices have soared by over 73% in the past five years to a median value of $2.516 million.

It’s not just houses that are enjoying escalating value thanks to the new CBD and South East Light Rail system. According to McGrath, at a recent auction a rather unassuming and somewhat dated Randwick apartment without the bells and whistles many Eastern suburbs flats possess sold for a staggering $135,000 above reserve.

Areas yet to have their light rail stations completed are also riding the wave of boosted property values. Even though the light rail is not yet operational in Kingsford, the anticipation of its unveiling has seen median house prices rise to $2.2 million – an incredible leap in value of nearly 104%.

WESTERN SYDNEY LIGHT RAIL

Development of The Western Sydney Light Rail is now in full swing, with completion of the project predicted for 2023. With the proven link between increased property values and light rail projects, buyers, investors and developers are already scrambling to snatch up any available property that surrounds the planned light rail routes, safely assuming the value of these properties will increase significantly upon its completion.

This is largely due to the benefits of living so close to reliable transportation hubs, such as access to employment opportunities, construction of new accompanying amenities, slashing of commute times and in turn increasing family and relaxation time.

THE OUTLOOK

The NSW Government has gone on record as saying that the growth of property values along the Sydney light rail corridor is a fundamental metric for success, which is a positive for investors and buyers looking to capitalise early.

So, if you aren’t looking for instant capital gain and can handle some construction noise, buying property around the new North West Rail Link and Western Sydney Light Rail could result in a nice, plump return on investment once the infrastructure is complete.

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