Huge Projects Still Driving Property Gains Worldwide

At Cycles, Trends and Forecasts we say we’re on schedule for the biggest property boom of all time. People are often sceptical. But just consider what’s happening right now across the globe. Take London, for example.

If you grew up playing Monopoly, you’ll know the cheapest London site to develop was Old Kent Road.

But things are changing.

Old Kent Road is now the site of a major urban regeneration program, fostered by the extension of the London Tube’s Bakerloo line.

The Bakerloo line connects famous locations like Piccadilly Circus, Oxford Circus and Regent’s Park. The new extension will take passengers from south of the Thames into the heart of the city. The extension of the Bakerloo line comes at the princely sum of £2–3 billion.

The gains in real estate prices around the Bakerloo line extension will be as prodigious as they were around the Jubilee line last property cycle.

And the Bakerloo line extension is only one of many transportation projects going on in London right now. It’s not even the largest.

In 2013 a report noted the top 100 UK regeneration projects. The first 18 each had an investment value of more than £1 billion, with the largest — at Nine Elms — estimated at more than £13 billion.

These projects are going to fuel prodigious urban development and land value gains — highly likely to be four times the benefit of the initial investment.

People think the UK is going to collapse because of the Brexit decision. Don’t believe them. There’s too much going on.

Similar trends in Australia

The City of Sydney recently released a report titled ‘Central Sydney Planning Strategy: 2016–2036’. This is the most detailed planning review for Sydney since 1971.

‘Tower Clusters’ are one of its main proposals. This is to allow for more development in Sydney, considering its natural barriers to expansion.

These clusters include an increase in the number of skyscrapers, plus a rise in height limits up to 310 metres. By way of comparison, the current restriction is 235 metres. The Sydney Tower is 309 metres.

According to The Sydney Morning Herald, this proposal would see floor space in Sydney rise by 30% from the current 8.3 million square metres of floor area in the CBD. The economic impact of such a development could be enormous. And it could pave the way for a new tallest building for the city.

But that’s almost small fry compared to what’s happening in Central Asia.

The ‘New Silk Road’ mega-projects

Since November 2014, we’ve been reporting on the ‘New Silk Road’ development China has initiated across Central Asia to link it to Europe (and Africa by sea). Huge projects are underway.

It’s going to change the history of the world.

It’s a mindboggling program currently involving 60 countries and covering two thirds of the world’s population (according to the Chinese).

The Financial Times gave a rundown recently on some of the major projects currently underway, including the:

  1. Moscow-Kazan high speed railway;
  2. Khorgos-Aktay railway;
  3. Central Asia-China gas pipeline;
  4. China-Kyrgyzstan-Uzbekistan railway; and
  5. Khorgos Gateway (a dry port).

Official Chinese figures put the current value of the 900 projects underway at almost US$900 billion. Eventually, China will have invested US$4 trillion in these countries.

Its name (the ‘New Silk Road’) is designed to capture nostalgia for times past, when the world’s major trading routes led in and out of China.

The modern incarnation of the Silk Road is more pragmatic, to allow for the swift and speedy passage of natural resources and goods in and out of China. As the world’s major trading nation, anything that lowers the cost and increases the speed of transport, gives it enormous benefits.

It enables China to increase the internationalisation of its currency. It also gives China a very real say on the affairs of countries where it is investing its money in large projects. Often delivered by Chinese firms, so the money flows back into China.

They used to say ‘all roads lead to Rome’. In the future, maybe we’ll say, ‘All routes lead to China’.

The Financial Times published a graphic showing the principal routes:

Source: Financial Times
Click to enlarge

Many of the land routes will link places via high speed rail, making the passage of goods into Europe much quicker. But sea routes will also be boosted through the creation of major ports — such as on the east coast of Africa — enabling African commodities and natural resources to be exported to China.

What effect is all of this going to have on the locations where the infrastructure is going to be built?

Yes, that’s right. Huge increases in land value.

All of these forces are building up into what is going to be a prodigious century of wealth creation.

The question is, how do you take advantage of it? That’s a topic I’ve been covering at length, working with Phil Anderson and Terence Duffy on Cycles, Trends & Forecasts. You can read more about that here.


Callum Newman,
Associate Editor, Cycles, Trends & Forecasts

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Callum is a feature editor for Money Morning. He covers areas of interest arising from world markets and the global economy that could mean new investment opportunities for Aussie investors.

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