Land value growth could be used to fund the proposed high-speed rail network on the east coast of Australia, The University of New South Wales (UNSW) research shows.
Land values and property prices around high-speed rail stations would increase by up to $140bn, a significant portion of which could be dedicated to funding its construction.
High-Speed Rail Value Uplift Report
High-Speed Rail Value Uplift: Preliminary Investigation Report from the UNSW City Futures Research Centre, calculates estimated growth or ‘value uplift’ in land values due to the HSR.
Policies need to funnel economic growth from the HSR to offset its costs will see tax payers share the benefits of land value increase and reduce pressure on states to finance it.
According to report estimates, the land surrounding a number of stations along the proposed HSR line on the east coast would experience a significant value increase – between $48 billion to $140 billion, in the population growth scenarios used in the report.
The projections show uplift for residential properties from improved accessibility and planning related value uplift from land rezoned to residential use around the stations.
The research has been receiving funding support through the Australian federal government’s Cooperative Research Centre Project (CRC-P) program, using the power of data analytics and artificial intelligence to provide insights into Australia’s property market.
“We’ve put together this report for policymakers and decision-makers to explore these growth scenarios and make informed decisions based on big data and analytics.”
“There are a lot of opportunities around the HSR for Australia to build stronger connectivity between cities and inject significant wealth and job opportunities into the regions.”
“The numbers in the report confirm and help quantify that considerable potential.”
The researchers calculated value uplift from improved accessibility by applying a value uplift coefficient, based on international case studies, on the total value of existing residential dwellings within the catchment area of proposed regional High Speed Rail stops.
The value uplift was calculated by subtracting the development costs from each area’s expected new dwelling values to obtain the residual land value (RLV) per new dwelling.
The RLV for each area was then multiplied by a range of population growth scenarios.
“We expect the values to be a conservative approach to estimation and that the total value uplift could actually be higher. This is while still factoring in a profit for the developers after all the external costs, including stamp duty, legal fees and building costs.”
The report says that the value uplift, as a direct result of the HSR and population growth in surrounding areas, can be captured with various policies known as ‘value capture.’
While the concept isn’t new and it partially funded the Sydney Harbour Bridge’s construction and it has been used to fund many other major rail projects abroad.
Recently, the Crossrail project in the UK, the Greater London Authority implemented a Business Rate Supplement, which is expected to generate £4.1 billion ($7.7 billion), contributing substantially to the total cost of the whole project of £14.8 billion ($27.9 billion).
Betterment levies, developer charges or taxes on property transactions are among the various mechanisms available to secure some of the benefits delivered by public investment.
For the High Speed Rail project in Australia, just how much value uplift can be captured comes down to the value capture policy frameworks and structure put in place.
“A substantial proportion of this value uplift could pay for a huge amount of the HSR.”
“You would be looking at tens of billions of dollars just from the residential value uplift alone, without even factoring in commercial, industrial and other beneficiaries.”
“Some of that value capture could also be used to invest into housing affordability schemes. It doesn’t necessarily all need to go towards the infrastructure,” Prof. Pettit says.
“The growth and benefits can be fairly and equitably distributed with maximum value.”
Business leaders endorse the High Speed Rail
Business leaders committed to infrastructure progress have also endorsed the creation of an HSR to have an outsized economic and social impact on regional cities.
James Abbott, the Managing Director of Abbott Advisory and an advisor to leading Australian property and infrastructure groups also offered additional insights.
“A nation building infrastructure project like this will go a long way to alleviating supply issues while supporting regional economic development and improved connectivity.”
“HSR can breathe new life into East Coast Australian cities and regions, driving prosperity and social equity for decades. It would be a gift from us to our future generations.”
“This study shows the potential for achieving it. It’s time to get the High-Speed Rail.”
The report calls for research to be conducted into the use of value uplift financial instruments, the formulation of a national settlement plan, and creating a national cities institute to ensure the maximum benefits realisation of an High Speed Rail network across Australia.
“This assists the nation in reducing emissions in the long term and go a long way to ensuring liveable, sustainable, productive, and resilient cities are planned along the HSR.”
“Australia is positioned to capitalise on this infrastructure to transform the nation.”
“If Government were to make a significant investment into the HSR, it would show strong leadership and vision and set up future generations of Australia into 2060 and beyond.”