Why Infrastructure Upgrades Matter For Home Buyers

Written by Nicholas Brown Posted On Wednesday, 07 January 2015 10:18

Making infrastructure a major consideration when you buy a home is a smart investment strategy that many people overlook. Much in the way that buying in a good school district pushes up the value of your property regardless of whether you have kids, locating property near good infrastructure historically affects appreciation rates positively. This works both ways, of course, and Emerging Trends in Real Estate 2015 explicitly expresses concerns about how lack of infrastructure spending and maintenance will damage the value of real estate holdings this upcoming year. The quality of roads, water access, sewer, and other public works considerations can greatly affect property values for better or for worse.

Looking at the broader picture of what markets are excelling right now, transit infrastructure is at the center of what makes many metro areas desirable. Cities with good public transit, especially trains and subways, appeal to a wide range of demographics from Millennials to retiring Baby Boomers. Neighborhoods that have developed a bike infrastructure with lanes and municipal racks are also popular. Proximity to rail transit brings up the value of homes considerably (so long as there is enough distance between the property and the rail itself). Outside the urban core, inner-ring suburbs and railway suburbs on the outer edges of more densely populated areas are also gaining popularity due to the convenience of taking commuter rails into the city for work.

Bike lanes and small urban parks improve the walkability of neighborhoods, which in turn makes them more desirable places to live. Places that are actively pressing forward with infrastructure upgrades are going to be the places where property values appreciate regularly and stay competitive.

The power of transit infrastructure on housing prices is illustrated by an example provided by StreetDirectory.com. Using two examples based on proximity to a highway project outside Raleigh, North Carolina. Each was defined by its distance from the construction and the amount of impact the work would have on the property (direct and indirect). In both cases, the procession of work on the highway tied closely to the value of the properties, losing value during construction and leveling off as the project neared completion. Researching and planning out your purchase based upon projects is a smart way to get a deal on a future winner.

However, infrastructure quality can go both ways. Our national infrastructure is something we don't think about until something fails: a water main pops or the power goes out. A bridge collapses or levee breaks. Currently the United States ranks 19th in the world for quality of infrastructure behind Spain, Portugal, and Oman. Staggering numbers of roads and bridges are in substandard-to-unsafe condition, and in many places water delivery and sewer systems are upwards of 100 years old. At the same time, our train system is pitifully outdated when compared to comparable industrialized nations--at a time when commuting via train is becoming more popular with the public.

Unfortunately, it can be difficult to assess the structural integrity of public works infrastructure first hand. It's simply not something you can crawl down a manhole and investigate. Because of this, doing research in local newspapers and recent public meetings, as well as ongoing municipal works projects, will give you a better idea of how dedicated your local government is. Look into how recent local sewage treatment facilities were built, and look into the water quality of the area. Looking into these factors can also give you clues to any upcoming projects that may help or hurt the value of your investment. Like any other element of smart real estate buying, research is key for finding the type of infrastructure that will appreciate value on your property investment.

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