The newest edition of the The Secret Agent Report features an article about the plans for a congestion charge in Melbourne. In today’s show together with Jodie Walker, the coauthor of the article, we take a look at plans for a congestion charge in Melbourne and what will happen to property prices in and around the CBD.
Kevin: The newest edition of the Secret Agent report features an article about the plans for a congestion charge in Melbourne. This is definitely a very hot topic. Traffic in Melbourne CBD is quite horrible, but will the congestion charge scheme really help? More importantly, what will happen with the property prices in and around the CBD?
Jodie Walker, the coauthor of the article, is my guest. Hi, Jodie. Thanks for your time.
Jodie: Good morning, Kevin. Thank you.
Kevin: Jodie, will introducing the congestion charge be effective in a city like Melbourne – or anywhere, really?
Jodie: Yes, we believe it would be. As we’ve seen from international examples – most recently in London – the congestion tax had huge benefits, where they saw a reduction in traffic levels of 10% in the first decade it was introduced. About 60% to 70% of drivers changed their mode of transport after it was introduced, and 50% of these changed to rail.
Melbourne has been likened to London in many ways, and we feel these cities are comparable enough to generalize the results of London to Melbourne.
Kevin: What will the charge be, Jodie? Do we know?
Jodie: We don’t know. That’s obviously a very hot topic, as well, in itself. We’ve estimated about $20 a day. Obviously, there would be discounts that applied to people living within the zone. In London, this was about a 90% discount. That would obviously have to be looked at in conjunction with public transport changes and ticketing in that area, as well.
Kevin: Now, I know in the report you went into a lot of detail and had a lot of research done. What do you think is going to happen to the property market in the zone? How’s it going to react initially?
Jodie: People generally have a habit of seeing only the negative effects when big changes are introduced. For this reason, we expect the instant reaction will be alarm and dislike at being faced with another tax. There will be a degree of uncertainty, and this will potentially dampen the market within the zone, because people won’t want to risk buying there until the effects of the charge are known.
Kevin: Any idea on that time frame at all, Jodie? Is it short term?
Jodie: Yes, short term. In the London example, what we saw was after only a year, prices began to rise again. Then about two years later, they returned to their baseline levels.
Kevin: What do you think will happen in the neighboring suburbs?
Jodie: That’s a good question. Suburbs adjacent to the zone we feel will most likely see a drop in prices. In the London case, the closer a property was to the border of the zone, the more negative this effect was. Even in the long term, there could be a slightly negative effect on property values because the traffic levels around the zone will increase. But we expect this negative effect will be more of slowing in the rate of growth rather than a reduction in prices.
Kevin: It’s almost a bit like a ripple effect, isn’t it? And obviously, you’re predicting that that will change with time.
Jodie: Yes. In London, while property prices initially dropped, they returned to their normal results, and we expect this would be similar in Melbourne. The only difference in Melbourne at the moment is the large number of apartments expected to be released in the CBD, which could have a cumulative effect with the congestion tax and dampen the market further, and potentially, it might take a longer time to recover.
Kevin: I guess, too, with all those extra units going into the city that’s going to make the situation even worse, and means that these things are probably going to have to come on. On the upside, though, Jodie, it will result in improved public transport into the area.
Jodie: That’s what would be required. For it to have success, we would need a better public transport network with more frequent services, as you see in a city like London.
Kevin: That, of course, will probably add fuel to the property market and even make it more popular in the long term.
Jodie: Yes, exactly. Properties within the CBD will most likely rise dramatically in value as they will see the greatest benefit from being within the zone. They’ll be faced with less noise, less pollution, better road safety, and obviously accessibility will be prime for these people.
Kevin: Jodie, it’s a great report. Thank you for your work and your insight into what that is. Watch this space, I guess, and we’ll see what happens.
By the way, too, we might actually put that report up on the site, which we’ve done in the past. Is that okay with you, Jodie?
Jodie: Yes, that’s fine.
Kevin: Okay. Just go and have a look for it on the link on the home page. You can find it there. Click on the report, and that’s the The Secret Agent Report May 2015 Congestion Tax.
My guest has been Jodie Walker. Jodie, thank you so much for your time.
Jodie: Thanks for having me, Kevin.