How property investors reap rewards from Infrastructure investment

Brett Alegre-Wood
June 25, 2016

What difference does it really make?

Whenever you attend a property investment seminar or read a book on property investment, you’re bound to come across a reference to the impact of infrastructure. It’s one of the first things I look for when I’m researching a potential investment, and as a property investor, it should be one of the first things you look for, too. But what is infrastructure, and what is the impact of infrastructure on property investment?

What is infrastructure?

Infrastructure is the essential services that we all need as businesses, families, and individuals. It encompasses three areas of economic and social influence: utilities, transport, and social.

Utilities are things like electricity, gas, water, and communications. Today, even a fast speed broadband connection adds value to your property investment – who’d have thought it?

Transport infrastructure includes both public and private transport – roads, rail, and airports, for example. We can see the difference that a major new public transport route has by considering how Crossrail 2 will impact your investment property.

Social infrastructure includes sports and leisure facilities, hospitals, parks, schools, etc.

What's the impact of infrastructure on property investors?

Clearly, anything that makes a location more appealing will increase property values in that area. However, it’s not as simple as saying that new or improved infrastructure will automatically increase property values. For example, the best increases in Crossrail towns are to be found within 15 minutes of the station. Why? Because that’s the distance people are prepared to walk to benefit from the improvement in train times.

This said, the impact of infrastructure when it is planned and financed shouldn’t be dismissed by the property investor. New schools and sports facilities will push up prices (remember how the regeneration of London’s East End gathered pace because of the 2012 Olympic Games?), as demand to live in an area increases. New infrastructure also produces economic growth.

Some is better than others

When a property investor researches infrastructure, he or she should look at planned infrastructure as well as what currently exists. The size, scale, funding channels, and type of infrastructure all play a part in the potential of a property investment. For example, a new airport will bring visitors to the area and provide long-term employment, whereas a new road link doesn’t have the same job creation clout.

Is there a golden combination of infrastructure build for property investment?

I’m often asked if there is a golden combination of infrastructure build, and to be honest I’ve never seen the absolute ideal: that would probably be a new airport, new railway line, more schools, better roads, and a commitment by local authority to regenerate – and all happening together over a period of years. But every now and then we find something pretty damn close.

Southall in London is an example of an area that was out of favour with developers and property investors for decades. But in 2012 a transformation process started. The local authority has instigated the Southall Opportunity Area Planning Framework, and the effects are dramatic, especially for the property investment potential. Early investors will see the full benefit of valuation growth spurred by the arrival of Crossrail, a major regeneration programme underway, and funding from the Mayor’s Regeneration Fund and Ealing Council and Transport for London. All this (and more) means that Southall is one of my top tips to be a hotspot for property investment as I write this blog.

Have you been thinking about investing in areas with changingfundamentals through infrastructure investment, regeneration, but aren’t sure where? Get in touch with us on               +44 (0)207 923 6100.

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