BBP external examiner discusses the impact of major infrastructure on residential property markets

UTAR Faculty of Accountancy and Management (FAM) organised a webinar titled "Impact of Major Infrastructure on Residential Property Markets: Melbourne Airport Case Study" on 24 February 2021 via Microsoft Teams with the attendance of 112 participants.

The invited speaker was UTAR Bachelor of Building and Property Management (BBP) (Honours) external examiner Prof Dr Alfred Christopher Eves. He is the associate dean for Research and Innovation of School of Property of Construction and Project Management at RMIT University. Moderating the webinar was FAM Head of Building and Property Management Department Low Chin Kian.

Prof Alfred is the external examiner for UTAR Bachelor of Building and Property Management (Honours)

After Low initiated the talk, Prof Alfred took the virtual stage and introduced the background of the Melbourne Airport Case Study, “My interest stemmed from a project I initially started in 2013 as I was approached by Brisbane Airport Corporation when I was in Queensland University of Technology, Australia. They were actually planning to put in a second runway with a parallel runway system.”

He highlighted, “The Brisbane Airport Corporation realised that some of the public was going to be quite negative about the new runway, therefore they wanted to know what would be the possible impact when the new flight paths come in. When people talk about major infrastructure programme, like the new development of railway, airport and etc, one concern is about the impact of house prices. Therefore, I started the case study by analysing the performance of a range of suburbs across Brisbane, the movements in the median and average house prices and the subsequent investment performance relative to the location of the flight paths and the potential aircraft noise from 1988 to 2019.”

Prof Alfred explained, “When we talk about the impact of major infrastructure, it is usually the impact of noises that people are concerned about, for example, the increase of movement, noise pollutions and so on, but what people really concerned about is its impact to their property; their housing prices. However, based on the result of my study, there were different views on how people react to noises. Fifty per cent of people gave positive comments, despite living under the flight path with aircraft noises as they think it consumes less time when commuting to work. Furthermore, some of the respondents feel positive about aircraft development as it will lead to a more quality housing development and there will be no high rise property or retail development at the surrounding.”

He continued the discussion by highlighting his research focus, giving seven comparisons. He compared suburbs with reported noise complaints versus suburbs with no or minimal noise complaints; suburbs located under the N70 24-hour noise contour versus suburbs adjoining the N70 24-hour noise contour; lower value noise complaint suburbs versus lower value no complaint suburbs; middle value noise complaint suburbs versus middle value no complaint suburbs; higher value noise complaint suburbs versus higher value no complaint suburbs; individual suburb capital return and investment performance from 1990 to 2019 and lastly the impact of development overlay and residential property performance.

Prof Alfred showing the suburb selection and comparing it with high reported noise complaints, low noise complaints and no or minimal noise complaints

According to Prof Alfred, he had chosen 36 suburbs to make the comparison. All the data he gathered on noise complaints are from Airservices Australia. He identified it with three categories, namely high noise complaints, low noise complaints and no/minimal noise complaints. For the high noise complaints category, there were six or more complaints on monthly basis; the low noise complaints category consists of two to three per month and there are no complaints or occasionally one per month for no/minimal noise complaints category.

The graphs showing the comparison of sales volume of low noise complaint location, moderate noise complaint location and high noise complaint location (left) and also the changes in annual sales volume (right) from 1990 to 2019

He explained the sales volume graph and changes in annual sales volume from 1990 to 2019 to the participants, “As we can see from the graph, the most sales occurred in low noise complaint location, while the sales of high noise complaint location are in between, and the moderate complain locations have fewer sales. Regardless of the location under the flight path, we can see that there is no much impact on the number of sales that occurs in the particular suburb; there is very little difference on the percentage of volume of transaction across the whole 30 years period.”He explained the sales volume graph and changes in annual sales volume from 1990 to 2019 to the participants, “As we can see from the graph, the most sales occurred in low noise complaint location, while the sales of high noise complaint location are in between, and the moderate complain locations have fewer sales. Regardless of the location under the flight path, we can see that there is no much impact on the number of sales that occurs in the particular suburb; there is very little difference on the percentage of volume of transaction across the whole 30 years period.”

Graph showing the comparison of investment performance on median house price index and average house price index on noise complaint suburbs and no noise complaint suburbs

Prof Alfred described, “Looking at the graph on the investment performance of median house price index on noise complaint suburb and no noise complaint suburb, the trend of house price movement is quite similar and does not see any significant drive that impacts the performance of the particular market. There are only minor differences shown especially in the average house price index.”

The average annual return of all noise complaint suburbs are higher than all no noise complaint suburbs

Graph showing the comparison of median price index from 1990-2019 for higher value suburbs, middle value suburbs and lower value suburbs on noise complaint versus no noise complaint

Prof Alfred showing the investment performance of average annual return for higher value noise complaint suburbs, middle value noise complaint suburbs and lower value noise complaint suburbs

He explained, “Based on the study of investment performance, we can see that the average annual return for higher value noise complaint suburbs is higher compared to higher value no noise complaint suburbs which are 7.55% and 7.01% respectively. While for middle value noise complaint suburbs, the average annual return of noise complaint suburbs is higher than no noise complaint suburbs which are 7.00% and 6.59% respectively. Lastly, the average annual return for lower value, the percentage is higher for no noise complaints suburbs which are 6.35%.”He explained, “Based on the study of investment performance, we can see that the average annual return for higher value noise complaint suburbs is higher compared to higher value no noise complaint suburbs which are 7.55% and 7.01% respectively. While for middle value noise complaint suburbs, the average annual return of noise complaint suburbs is higher than no noise complaint suburbs which are 7.00% and 6.59% respectively. Lastly, the average annual return for lower value, the percentage is higher for no noise complaints suburbs which are 6.35%.”

Graph presenting average house price trend from 1990-2019 and the investment performance comparison on N70 24-hour contour and adjoining N70 24-hour contour

Prof Alfred said, “The trend of the average house price sales and movement within the N70 24-hour contour compared to the adjoining N70 24-hour contour is very similar, the average annual return for suburbs within historic N70 24-hour contour is slightly higher and outperformed than suburbs adjoining historic N70 24-hour contour. Therefore, in this situation, we can conclude that the aircraft noise does not have an impact on people making their purchase and investment decision.”

Nearing the end of the one-hour talk, he shared about development potential, “Development potential is where overlays come in. There are two overlays. The first one is Melbourne Airport Environs that overlays one; it refers to the actual airport precinct itself. The second one is Melbourne Airport Environs that overlay two covers. There are a lot of the developments outside the airport precinct that takes in quite a number of suburbs that have housing development that is subject to the development of overlays.”

Prof Alfred concluded, “The trend in the annual volume of sales had been very similar for the 36 suburbs analyses on a noise complaint basis when the change in volume from year to year is compared. It has also been confirmed that the length of homeownership is not linked with aircraft noise with high noise impacted suburbs in Melbourne. We see evidence that people who live near the airport are quite happy to stay in that environment compared to being away from the airport. It can be interpreted that locations in suburbs subject to aircraft noise complaints will have minimal impact on the rate of sales compared to non-affected property.”

He emphasised, “In Brisbane, suburbs like Highgate Hill and Holland Park maintain strong price growth through airport developments due to their renowned prestige, good schools and proximity to the Sydney Central Business District, despite being near the flight paths. It was found that the variation in median house price trends and long-term investment performance reduced and still falls within very tight ranges regardless of location and exposure to aircraft noise. These very similar investment performance results again confirmed that the residential property purchaser considers a range of factors when purchasing and valuing houses. These factors include price, views, location to services, distance to work and transport, reliability of transport, recreational facilities, health facilities and schools, as well as negative factors, such as road noise, aircraft noise, crime and poor environmental factors.”

The one-hour discussion then saw an active interaction between the speaker and the participants. The talk concluded with an extensive yet insightful Q&A session.

A group photo at the end of the webinar