Skip to content
Get free consultation!

Powering Your Property Investment: Why Utilities Accessibility is Key to Success

CM Law's Ultimate List: The top 50 FAQs on Buying a Residential Investment Property #40. Utilities Accessibility

Introduction

When purchasing a residential investment property in Australia, accessibility to essential utilities such as water, electricity, gas, and telecommunications plays a vital role in determining the property’s value and attractiveness to tenants. Investors often overlook this aspect, focusing more on location and market trends. However, ensuring that a property has reliable and easy access to utilities can significantly impact its future marketability, rental yield, and development potential. In regions like New South Wales (NSW), where regulations surrounding infrastructure are strict, utilities accessibility is not just a convenience but a necessity for long-term investment success.

Importance of Utilities Accessibility:

Water Supply and Quality:

Access to a consistent and reliable water supply is a non-negotiable for any residential property. In NSW, water is supplied by local water utilities, such as Sydney Water, which services metropolitan areas, and regional utilities that manage water in rural areas. When buying investment properties, especially in growing suburbs or rural regions, it’s important to verify that the property has a strong water supply network in place. Additionally, properties with access to higher-quality water services are more attractive to potential buyers and tenants, increasing overall investment value.

For instance, properties in Sydney’s Western Suburbs benefit from a well-established water supply network. However, in more remote areas of NSW, some properties may rely on rainwater tanks or bore water systems, which can impact long-term value and tenant demand. Investors need to account for these factors when evaluating utilities accessibility.

Electricity and Gas Connections:

Electricity is essential for every residential property, and investors need to ensure that the property has adequate and reliable electrical connections. Properties in newer developments usually have modern infrastructure in place, but older properties or those in rural areas may face issues like outdated wiring or inconsistent supply. In NSW, electricity providers like Ausgrid and Endeavour Energy ensure that most metropolitan and regional areas are connected to the grid, but rural properties may face challenges related to distance from power sources.

Similarly, access to natural gas can be a significant factor, particularly for tenants who prefer gas-powered heating and cooking. Some regional areas in NSW do not have access to natural gas pipelines, which can make properties less appealing to certain renters. Ensuring that the property has the right energy connections is crucial for maximizing its investment potential.

Telecommunications and Internet Connectivity:

In today’s digital age, fast and reliable internet access is a priority for most renters. A property’s investment potential can significantly decrease if it lacks access to high-speed broadband, especially in urban areas where internet connectivity is expected. The National Broadband Network (NBN) has been rolled out across most of NSW, providing high-speed internet to residential properties. However, investors should verify whether the property is connected to the NBN or whether there are limitations to internet speeds.

Suburbs and regions where NBN access is limited or non-existent may struggle to attract tenants, particularly those who work from home. In contrast, properties in metropolitan areas with high-speed fiber-optic internet connections tend to be in higher demand and achieve better rental yields.

Behaviour of the Participants:

The importance of utilities accessibility becomes apparent when investors face unexpected challenges. One investor in regional NSW, desperate to make their new investment property viable, discovered that the property was too far from the main electricity grid, requiring expensive upgrades to bring power to the site. This unexpected cost led to financial stress, as the project’s profitability diminished significantly.

Similarly, another investor in Sydney’s growing outer suburbs found themselves in a panic when their tenants complained about slow internet speeds, despite assurances that the NBN would be available. The delay in NBN installation led to rental disputes and ultimately caused the investor to lose income as tenants moved to better-connected properties.

Legal Process and Court Involvement:

Legal disputes can arise when utilities are not as accessible as advertised. In the case of Peterson v Blue Sky Developments [2019] NSWLEC 1278, the buyers of a residential property sued the developers over misleading claims regarding utilities access. The developers had advertised the property as having full utility services, but upon purchase, the buyers discovered that the property lacked gas connections and was not adequately connected to the electricity grid. The court ruled in favor of the buyers, awarding them compensation for the costs of installing the necessary utilities and the loss of rental income due to the delays.

This case highlights the importance of ensuring that all utilities are readily accessible and properly connected before purchasing a property.

Financial Consequences:

The financial impact of utilities accessibility issues can be substantial. In the Peterson v Blue Sky Developments case, the buyers faced an initial $150,000 in unexpected costs to bring utilities to the property. Additionally, they lost $30,000 in potential rental income during the months the property was uninhabitable due to the utility issues. These unforeseen costs significantly affected the profitability of the investment.

Major assets affected in such cases include the utility infrastructure itself, such as the cost of connecting electricity, gas, and telecommunications services. Investors should be aware that properties in less developed areas may require significant upfront investment to ensure full utilities access.

Considerations for Investors:

  1. Utility Access Verification: Before purchasing an investment property, confirm with utility providers that the property has reliable access to essential services like water, electricity, gas, and high-speed internet.

  2. Utility Costs: In rural or developing areas, check if the property requires additional utility infrastructure, such as extensions to electricity grids or water supply systems. These costs can erode profit margins.

  3. NBN and Internet Speeds: Ensure that the property has access to high-speed broadband, particularly in metropolitan areas. Properties without internet connectivity may struggle to attract tenants in today’s market.

  4. Legal Protection: Ensure that any claims made about utilities accessibility in property advertisements are backed by documentation. Misleading claims can lead to legal disputes and costly upgrades post-purchase.

Statistics:

  1. NBN Coverage: As of 2022, 92% of NSW properties are connected to the NBN, with rural areas still facing connectivity challenges (Source: NBN Co).

  2. Electricity Grid Coverage: Over 95% of NSW properties have access to the electricity grid, but rural properties may face higher costs for connection (Source: Ausgrid).

  3. Internet Speeds: Properties with access to high-speed internet are 15-20% more likely to attract higher rental prices compared to those without (Source: CoreLogic).

  4. Utility Installation Costs: In NSW, the cost of extending electricity and gas services to rural properties can range from $10,000 to $50,000 (Source: NSW Energy Providers).

  5. Gas Access: Only 70% of properties in regional NSW have access to natural gas pipelines, limiting options for tenants who prefer gas heating (Source: Energy NSW).

  6. Water Supply: Properties in NSW’s metropolitan areas have 100% water supply coverage, but rural properties may rely on rainwater tanks (Source: Sydney Water).

  7. Utility Disputes: Legal disputes over utilities accessibility have risen by 15% in NSW over the past five years (Source: NSW Law Society).

  8. Property Vacancy: Properties without access to reliable utilities have a 25% higher vacancy rate than fully serviced properties (Source: REINSW).

  9. NBN Delays: Areas without NBN access experience a 10-15% lower property value compared to connected areas (Source: Property Council of Australia).

  10. Utility-related Renovations: 12% of property buyers in NSW have had to invest in utility-related upgrades post-purchase (Source: NSW Property Buyers Group).

Essential Resources:

Government Resources:

Non-Profit Resources: