How the AUKUS agreement could impact the property market

AUKUS—is it all about submarines? Well, yes, that of course is the Australian government’s intent with the AUKUS Agreement, a trilateral security pact between Australia, the UK and the US to develop nuclear-powered submarines for our island nation. But an unintentional benefit of this initiative may arise for Australia’s property market, specifically those areas designated for submarine construction and maintenance.

In the States, Trump’s reelection has some stakeholders concerned about whether the pact will indeed proceed based on the agreed upon terms, given the president-elect has often rethought his predecessors’ agreements. But we’re going to assume that AUKUS has its course set and show you how that could impact the nation’s property landscape.

Economic impact and job creation of AUKUS

The AUKUS submarine project is expected to generate substantial economic benefits across Australia. The construction and maintenance of these submarines will require a skilled workforce, leading to job creation in various sectors, including engineering, construction and specialised trades.

In South Australia, the Osborne shipyard is slated for expansion to accommodate submarine construction, potentially creating over 8,000 jobs and delivering direct and indirect economic benefits estimated at approximately $200 billion over the coming decades. Any event that significantly helps the local economy, creates jobs and requires people on the ground means a need for roofs over heads.

It also can mean a sector of the employment market may see increased earnings, enabling those particular residents to seek higher value homes.

The three residential markets that’ll benefit from AUKUS

AUKUS is likely to see local property markets bolster, given that workers will likely look for residences closer to work—particularly if they are specialists in their field and are unable to look for employment elsewhere anytime after construction begins.

Here are the top three property markets we think will benefit from AUKUS:

• Osborne, SA: The expansion of the Osborne shipyard is anticipated to stimulate the precinct’s property market. An influx of workers and their families will likely increase demand for housing, leading to property value appreciation. This aligns with the projected economic boom that’s expected to underpin long-term confidence and growth in the region’s real estate sector.
• Rockingham, WA: The AUKUS submarine plan is expected to have a significant impact on the property and rental markets in suburbs such as Rockingham, Safety Bay, Waikiki and Shoalwater. These suburbs in Perth’s southern corridor will likely see an influx of workers, and increased demand for housing in these areas may lead to rising property values and rental prices in an already hot property market.
• Port Kembla, NSW: While details are still emerging, Port Kembla has been mentioned as a potential site for submarine-related activities. If confirmed, this could lead to increased demand for housing and infrastructure development in the region, positively impacting the local property market.

What about commercial property?

From retail outlets to industrial facilities to apartment buildings, AUKUS is expected to bring in between $35 million to $40 million worth of infrastructure projects and commercial asset builds in both Adelaide and Perth.

It’s the biggest single-reason injection of infrastructure we’ve seen in quite some time, and let’s be honest… we need it.

What’s stopping property growth from AUKUS?

Yes, Trump is certainly a potential challenge for AUKUS to realise its full potential. The 45th and 47th US president has been known to revise many of his predecessors’ decisions, and many expect the AUKUS agreement to be subject to such revision. That said, it’s perhaps less a question of whether the agreement will proceed, but how and on what terms.

Beyond this, while the AUKUS agreement presents significant economic opportunities, it also brings about challenges, particularly concerning housing availability.

The anticipated influx of workers may exacerbate existing housing shortages in the affected areas. Here in WA, Rockingham’s vacancy rate of around 0.5 per cent is already driving people further south in search of affordable housing.

Addressing these shortages will be crucial to accommodate the growing population and sustain property market growth. It’s forecasted that 24,500 dwellings need to be built to ensure enough housing for AUKUS’s workers. Are our governments doing enough to ensure these areas have adequate housing? That’s a story for another day.

Time will tell if all of this comes to fruition

The AUKUS agreement is set to have a profound impact on Australia’s property market, especially in regions associated with submarine construction and maintenance. Time will of course tell whether the agreement proceeds with its original terms. But the economic stimulus and job creation are expected to drive demand for housing, perhaps leading to property value appreciation.

Why is this important to you? If you’re an investor, these are the sorts of local and state activities you may want to consider. Especially when either entering or thinking of exiting a particular property market.

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