Infrastructure and Investment:

Australia
Eliot Sperling
August 2017
Meadpoint Asia Pte. Ltd.

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 The 21st century marks an era of rapid advancement for Nations across the

world. Almost every sector is experiencing a surge in technology and systems. With

the majority of infrastructure systems dating back to the 20th century, Countries

around the world are finding themselves lagging behind due to outdated systems. The

new generation of employees, Millennials (20-34 years old), are not willing to spend

hours commuting to and from work like their parents, the Baby boomers were.

Technology has created a newfound impatience in society that Governments have to

rapidly combat. Societies around the world are calling for large scale Government

spending on improving infrastructure like roads and railways. With the number of

people and cars on the roads growing exponentially everyday, old roads and rails have

been showing signs of wear and tear for several decades. By creating new

infrastructure systems and upgrading old ones, Governments can draw millions in local

and overseas investments. Infrastructure systems can create new business hubs which

require office buildings, residential buildings and the services that support these

sectors; ultimately, attracting real estate investors, such as Meadpoint Asia.

One country that appears to be ahead of the curve and has been focusing on

infrastructure is Australia. Australia recently released their 15-year infrastructure

plan, which has been a top of the line item during budget proposals. Under Prime

Minister Malcolm Turnbull, the Federal Government aims to make Australia “more

affordable, innovative and competitive energy, telecommunications, water and

transport services” (Infrastructure Australia). The Australian Federal Government is

currently pushing forward with several large-scale infrastructure projects across the

continent, accounting for over A$75 billion in the Federal budget over the next 10

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years. Infrastructure Australia, an independent consulting group, has shortlisted seven

projects as ‘high priority projects’ that are nationally significant to the advancement

of Australia. These projects are:

1. M4 Motorway Upgrade (Sydney)

Five of the seven projects have already started construction, with estimated

delivery dates between 2020 and 2025. The two projects that have not yet started,

Ipswich Motorway upgrade and the Western Sydney Airport, are in the process of

obtaining clearance to build and securing financing from the relevant Local, State and

National Governments.

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Figure 1. Australian infrastructure projects and monetary allocation. (Australia

Budget)

Studying and understanding infrastructure presents the opportunity for

businesses and investors to get in early on locales that will soon benefit from changes

to roadways, rails and airports. With the creation and improvement of infrastructure,

economic and residential hubs will form near and along the new routes. The two

projects that have the most potential for future real estate investment are the

WestConnex project in Sydney and the Melbourne Metro Rail. Both the WestConnex

and Melbourne Metro Rail project are set to revitalize and create new areas for

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investment. The WestConnex project will create an additional 21 miles of road,

linking the existing M4 and M5 motorways. Additionally, the WestConnex project will

create more than 8 miles of pedestrian and bicycle paths. The Melbourne Metro Rail is

set to create five new train stations to facilitate travel in and around Melbourne. In

2016, Melbourne accounted for 18.5% of Australia’s National GDP (SGS Economics &

Planning).

Sydney is notoriously known for having some of the worst transportation

infrastructure systems in a highly developed Country. The infrastructure systems have

been compared to the likes of those found in Indonesia (Sydney Morning Herald).

Government officials and residents have noted this and are working to alleviate the

problem. Figure 2 shows the approved WestConnex project that will extend the

current M4 Motorway beyond the City of Parramatta to Sydney where the motorway

will be connected to the M5 Motorway. The WestConnex project has an estimated

price tag of A$20 billion.

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Figure 2. WestConnex Project. (WestConnex)

Figure 2 contains a small map of Sydney's orbital motorways. The WestConnex

project aims to bring all of the motorways together and allow for traffic to enter and

exit Sydney more easily. WestConnex will eliminate the need for 52 sets of traffic

lights, allowing cars to pass unhindered. The opportunities for real estate investment

in the greater Sydney area will be greatly impacted upon completion of the

WestConnex project in 2023. Housing affordability is increasingly becoming a big issue

in large cities like Sydney.

Using Meadpoint Asia’s investment strategy of Millennial housing, locales along

the M4 and M5 motorways could potentially become hubs for Millennials to live in and

commute into the Sydney CBD. Five potential areas that could grow rapidly due to

WestConnex are Auburn (which includes the Sydney Olympic Village), Bankstown,

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Canterbury, Liverpool and Parramatta (Figure 3). All five are strategically located

along the M4 and M5 routes that will join in Newtown, 5 kilometers from the Sydney

CBD.

Figure 3. Five cities and towns that could become hubs for working Millennials.

(Diesel News)

As of 2016 over 165,000 Millennial age people live in the five cities and towns

in Figure 3. With Sydney being a major business and tourism hub it is unlikely that

office buildings or hotels would prove to be profitable outside of Sydney. However,

Millennial housing has potential outside of Sydney. Young adults working in Sydney

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may view living outside of Sydney as a viable option once WestConnex is completed

and it becomes easier to commute.

The City of Parramatta is one of Australia's fastest growing cities. The State of

New South Wales is quickly gaining attention and interest from across Australia and

the World for having two large scale CBD’s. The Parramatta CBD is expanding at an

average rate of “two bus loads per week” (The Daily Telegraph Australia).

PricewaterhouseCooper (PwC) conducted a study of the Parramatta CBD in 2016. PwC

estimates that the value of Parramatta’s economy will be A$30 billion by 2021.

Additionally, by 2021 more than 186,000 people are expected to work in Parramatta.

The four other towns: Auburn, Bankstown, Canterbury and Liverpool are

currently small towns, however due to their location they have potential to grow.

Stage 3 of the WestConnex project that connects the M4 and M5 motorways just

outside of Sydney is expected to carry more than 120,000 vehicles daily, according to

transportation officials of the New South Wales Government.

Just over 800 miles Southwest of Sydney lies Melbourne. Much like Sydney,

Melbourne has been struggling with an aging infrastructure system which has

ultimately limited growth in and around the Melbourne CBD. The Melbourne Metro

Rail, which started construction in late 2016 aims to alleviate and reduce traffic and

travel times to and from the Melbourne CBD. The new metro rail will be an

underground nine-kilometer rail from South Kensington to South Yarra, passing

through the CBD (Metro Tunnel). The new underground tunnel will reduce surface

level traffic and allow for the trains to proceed at higher speeds. The plan is for five

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new stations to be created. Figure 3 below shows the new five stations.

Figure 4. The proposed and approved Melbourne Metro Rail line. (Metro Tunnel)

The Melbourne Metro Rail is set to cost roughly A$10 billion with a projected

delivery date in 2026. This is a long-term project that could potentially be of interest

to real estate investors and developers. Both the Arden and Domain stations are

located just outside of the CBD, where it is likely that residential stock will increase.

As the Millennial era of employees enters the workforce the willingness to endure long

commutes disappears. The Domain station is located roughly two miles outside of the

CBD. Surrounding the proposed Domain station, in South Yarra, are several light rail

train stops that could potentially extend the radius for residential living. The Arden

station which is set to be three miles from the CBD will be located in the South

Kensington station where two train lines meet. The Werribee and the Williamstown

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lines stop at over 30 different train stations making South Kensington another

potentially viable option.

According to the 2016 Australian Census data, there are currently more than

one million Millennials living in Melbourne. Figures from the Department of

Environment, Land, Water and Planning show that Melbourne’s population is projected

to double by 2031. By 2030 Millennials will account for 50% of the workforce. With an

estimated two million Millennials projected to live in Melbourne, Millennial housing

might prove to be highly profitable in the Melbourne area.

Australia is spearheading the charge to modernize infrastructure at a rate few

can keep up with. With over A$75 billion already committed and more capital

expected to follow, Australia will have some of the most up-to-date and modern

infrastructure systems in the Western world. Another project to keep an eye on is the

Western Sydney Airport. As of now Sydney, which has a population of five million, is

being served by one airport. The addition of a second airport will allow for Australian

residents as well as the millions of visiting tourists to travel faster and more easily to

and from Sydney. Figure 5 shows the location of the proposed Airport in Badgerys

Creek, Western Sydney. On top of creating thousands of jobs and millions of dollars in

revenue, the airport is strategically located to facilitate transportation. The Western

Sydney Airport will be accessible via several motorways across New South Wales. The

WestConnex project will additionally provide access to the new airport.

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Figure 5. Proposed Western Sydney airport in Badgerys Creek. (Sydney Morning

Herald)

Finding the right investment can be extremely hard and often requires

extensive research and background information. Infrastructure projects may be useful

tools to help identify potentially interesting areas to invest in. The Australian

Government has decided to commit millions to the ‘high priority projects’ listed by

Infrastructure Australia because the officials believe these are areas that will benefit

greatly and grow in the near future. Although following the infrastructure projects is

not a sure fire way to find investments, it is another tool to use to examine different

areas across Australia. The list of infrastructure projects that are set to take place in

the next 10 years in incredibly long and dense. The Government has said they will

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continue to allocate money for infrastructure projects across Australia. This is a good

sign for investors. New areas will emerge as economic, residential and tourism hubs

while the old areas modernize creating a strong Australian economy and hopefully a

strong backbone for investment.

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Sources:

1. "Australian Census 2016." Australian Bureau of Statistics. N.p., n.d. Web.

a. http://stat.data.abs.gov.au/

2. "Australian Infrastructure Plan." Australian Government - Infrastructure

Australia, 13 July 2017. Web.

a. http://infrastructureaustralia.gov.au/

projects/infrastructure-priority-list.aspx

3. Rawnsley, Terry. "GDP by Major Capital City 2015-2016." SGS Economics &

Planning. Independent Insight. N.p., 5 Dec. 2016. Web.

a. http://www.sgsep.com.au/publications/gdp-

major-capital-city-2015-2016

4. "WestConnex." WestConnex Australia. N.p., 26 July 2017. Web.

a. https://www.westconnex.com.au/

5. "Melbourne Metro Tunnel." Metro Tunnel. Melbourne Metro Rail Authority,

28 July 2017. Web.

a. http://metrotunnel.vic.gov.au/

6. Robertson, James. "Sydney Transport Lets City down in Best Cities of the

World Report." The Sydney Morning Herald. The Sydney Morning Herald,

22 May 2014. Web.

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 a. http://www.smh.com.au/nsw/sydney-

transport-lets-city-down-in-best-cities-of-the-world-

report-20140522-38qu8.html

7. "New Minister for Infrastructure and Regional Development, Warren Truss

Getting Cracking on WestConnex." Diesel News. N.p., 25 Sept. 2013.

Web.

a. http://www.dieselnews.com.au/new-

minister-for-infrastructure-and-regional-development-warren-

truss-getting-cracking-on-westconnex/

8. Tabakoff, Nick. "Project Sydney: Building a City of Dreams - Parramatta

in the Greatest Growth Boom in Its History." The Daily Telegraph. N.p.,

12 Oct. 2016. Web.

a. http://www.dailytelegraph.com.au/news/

nsw/project-sydney-building-a-city-of-dreams--parramatta-in-the-

greatest-growth-boom-in-its-history/news-story/

1935b07853216507b900d85e47fdabda

9. "Australian Budget 2017-2018." Australian Government Department of

Treasury. N.p., n.d. Web.

a. http://budget.gov.au/2017-18/content/

glossies/jobs-growth/html/jobs-growth-01.htm

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10.Saulwick, Jacob. "Sydney 2026: The New Airport." Sydney Morning

Herald. N.p., 9 May 2015. Web.

a. http://www.smh.com.au/nsw/westconnex-

new-sydney-motorway-to-push-toll-to-11-per-trip-20150507-

ggw9ky.html

11.Anderson, Stephanie. "Melbourne's Population 'to Double, Victoria to Hit

10m'." ABC News. N.p., 15 July 2016. Web.

a. http://www.abc.net.au/news/2016-07-15/

melbourne-double-in-size-as-victorias-population-10million/

7632700

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