$8 Litre Petrol: Implications for Property Investment in Australia

petrol-pump-225x300CSIRO has just released Fuel for Thought, a report from the cross-sector Future Fuels Forum. Their worst case scenario of petrol at A$8/litre by 2020 has made headlines in Australia.

Even with petrol not yet at $2/litre there is a noticeable increase in deamnd from both buyers and renters for properties which are either within 10km of the city centre or close to suburban public transport, particularly rail. It would appear that the major loosers are the new suburbs 20km plus from the centre with no rail links. These lower-cost suburbs are beginning to make no economic sense if a family needs to run two cars and commute significant distances daily for work and school.

Although the current spike in oil prices, is probably just that a spike, more to do with short-term market speculation rather than long term supply/demand. It is however likely that longer-term oil is permantely going to be more expensive which is going to cost commuters dearly until alternative fuels become mainstream. The electric car, and biofuel engine will be developed but short term the most efficient and cheapest options for pubilc transportation is suburban rail services. Unluckily for Australians many of their main cities do not have a well-developed rail infrastructure: Brisbane’s rail network has not kept up with its population growth and Sydney’s does not meet today’s demand and does not serve large areas of the western suburbs.

In contrast to outlying new suburbs, smaller towns with strong employment such as Waroona and Yarloop south of Perth. These towns have traditionally had their workforce for mining and industy commute from Mandurah in the north. However now even that 30 minute commute is persuading homebuyers to look at buying sections which start at $135,000, considerably cheaper than coastal Mandurah. So not only can workers move and upgrade their house they can also save on their commuting costs.

The wise investor will research the current and planned rail corridors and look for property near those corridors. For many years London and SE England’s property have been strongly driven by the access to rail services. Now we will start to see the same focus in Australia. The interesting thing wil be which states and cities have the political will to develop their infrastructure in timely enough manner.

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