This article has been republished from the August edition of the digital magazine.
Location is key to any property’s capital growth, and one factor which can play a pivotal role in determining the value of a location is proximity to transport infrastructure, such as train stations. However, it is important to consider whether this proximity can also be seen as a downside.
The Investors Agency and DIYBA co-director Bobby Haeri said rental properties typically gain high demand when they are near train stations, which give potential tenants accessibility to other parts of the city or region.
“If there is a train line, especially a major train line, you can be sure that there are supporting transport, parking, and amenities close by which will continue to put upward pressure on housing and rent prices,” he told Your Investment Property Magazine.
“For example, you can be confident that there will be supporting lifestyle amenities such as shopping centres, schools, recreational facilities, and parks in the region.”
A classic example is the Hills district in Sydney. Property prices in this market have more than doubled in the last six years due to the development of a metro train line which cuts travel times to the city by up to 50%.
The construction of the Melbourne metro tunnel project is also a good indication of how infrastructure can help boost property values. While the project has yet to be completed, nearby suburbs such as Mandurah, Rockingham, and Warnbro are already seeing up to 40% growth in prices over the last two years.
Pure Property Investment CEO Paul Glossop said it has been a long-term trend for property within two kilometres of a major train station to see above-average capital growth.
“Regardless of which major city you are referring to, proximity to train stations with direct train links to major employment and lifestyle hubs will see the value of the land appreciate in value far stronger than areas that are only a drivable commute distance from that train station,” he told Your Investment Property Magazine.
“Always remember that the land is the appreciating component of the asset. The density over the long-term is typically increased to accommodate more residents due to there being a scarcity of direct land within close proximity to train stations.”
Properties near trains — who are they for?
Mr Glossop said proximity to train stations attracts working professionals in white-collar jobs within industries such as healthcare, finance, professional services, and government office employment.
“The benefit of attracting these cohorts of potential buyers and renters is that they typically see strong wage increases over a long-term period of time, and as such will have the ability to pay more for property and rent over the forthcoming 10, 15, or 20 years,” he said.
Meanwhile, Mr Glossop said there is an emerging trend of such properties having the additional benefit of being within close proximity to lifestyle corridors like waterways, beaches, major parks, and outdoor areas.
“With the emergence of a hybrid working and working from home, more people are looking for access to train lines whilst still having great access to lifestyle amenities close by where they live,” he said.
“This allows them to access their place of employment during the week where required but also have close proximity to lifestyle attractions when they are not working.”
Advantages and challenges
Ray White Commercial Western Sydney managing director Peter Vines said the convenience and accessibility of public transport make a market favourable to strong rental demand and therefore higher rental yields.
“Historic sales would also show that properties near train stations often experience capital growth due to demand and desirability for both commercial and residential investment,” he told Your Investment Property Magazine.
“You also often find that there is limited stock in areas that are near train stations, which can create a supply-demand imbalance, driving up property prices.”
Perhaps the biggest opportunity for properties near a train station is the prospect of urbanisation and an increase in density development in the area.
Mr Vines said train stations tend to attract businesses, restaurants and cafes, shopping centres, entertainment, and other community amenities, making the market more attractive.
“This urbanisation can absolutely impact property values further as people are often willing to pay a premium to live in an area that offers convenience, vibrancy, and access to lifestyle amenities,” he said.
“Train stations are also not discriminating when it comes to demographics — in fact, they are appealing to young professionals, students, families, and retirees because we all use trains.”
“Also, there is strong demand from international students and migrants who are very used to living around stations.”
For Mr Vines, this broad demand helps maintain consistent demand for properties near train stations, supporting property value and a consistent rental stream.
However, there are always potential risks and challenges when investing near train stations — some risks include noise pollution, which could impact the quality of life for residents and the productivity of businesses.
“Investors should also want to explore any potential changes in transportation infrastructure because this could impact the demand in specific locations,” he said.
Finding the sweet spot
Mr Vines said due diligence is needed when considering investing near a train station.
“Consider things like, is the property within walking distance to the station, are there parking facilities nearby, and is it well connected to other modes of transportation? You’d also want to explore the long-term value of the train station — are there planned upgrades and is it reliable for the community?” he said.
“I’d also explore plans for amenities and services in the area that support the appeal of the community.”
Mr Haeri shared similar thoughts, adding that a property’s value, demand, and sales potential are subject to the influence of multiple factors when it is in close proximity to a train station.
“If the property is too close to the train station, say less than 200 metres, then some tenants and homeowners will be deterred as there may be noise pollution,” he said.
“Also, if the property does not have double-glazed windows or is a fibro dwelling, then the noise will have more of an impact.”
The property is considered to be in the perfect place when tenants can walk to the station and remain unimpacted by the noise pollution.
Mr Haeri said sale prices of properties impacted by noise could be 5% to 10% cheaper.
“Properties which are on main roads or are affected by train noise take far longer to sell,” he said.
“As a vendor, you might also need to discount your sale price if the market is not as hot and if buyers or renters have more options.”
“Apart from this, there are no specific trends of patterns as there are too many variables such as the quality of the build, the aspect of the property, or the number of trains which go by.”
Still, the type of property is also something to consider.
“If you can own a detached dwelling rather than an apartment, townhouse, or unit within close proximity to a train station, then you drastically increase the probability of capital growth due to the likelihood of council zoning laws loosening over time due to population growth,” he said.
“So, if you own a house on a block of land and the zoning laws change then the value of your land drastically increases, and you increase the probability of a strong offer from a developer.”