The Effect of Transit Lines on House Prices
Although rapid transit projects can cost up to billions of dollars to construct, a new study from UBC’s Sauder School of Business explores how improved access to employment centers can increase nearby home prices in urban areas.
Anming Zhang, a professor in the operations and logistics division at the UBC Sauder School of Business — and the Vancouver International Airport Authority Professor in Air Transportation, co-authored The Effect of a Subway on House Prices: Evidence from Shanghai with Zhengyi Zhou from the Shanghai University of Finance and Economics, Hong Chen from the Shanghai Jiao Tong University, and Lu Han from the University of Toronto.
The study observed the new subway line 6 in Pudong district Shanghai, China, where the population rose from 14 million to 17 million in eight years, and connected major employment centres.
“While the study focuses on Shanghai, the findings can be applied to rapidly growing urban areas across North America and around the world — especially those like Vancouver that are less established and are continuing to grow,” said Zhang.
After the new subway line opened, Zhang and his team calculated the reduction in commuting time from each home to each employment centre, and examined resale property prices.
The researchers found that homes within one-kilometre walking distance to a station saw, on average, a 3.75 per cent boost in value.
According to their analysis, the largest price increases didn’t happen near the central business district — the equivalent of a North American downtown core — but rather in the most distant residential zone newly connected by rapid transit.
In Toronto, a similar circumstance is on the rise with the construction of the Eglinton Crosstown — a light rail transit line that will run along Eglinton Avenue between Mount Dennis (Weston Road) and Kennedy station.
This transit expansion is expected to make property within walking distance of Eglinton more valuable, according to urbaneer.com.
Here Comes The Eglinton Crosstown LRT
In torontoism.com’s Increasing Toronto Population: Is Development Catching Up? article, Richard Silver, Certified International Property Specialist and Global Real Estate Advisor with Sotheby’s International Realty Canada, says: “Transit is one of the most important things for the city’s future. A lot of the development you see has to do with the proximity of the subway system.”
The article suggests that Yonge and Eglinton was once considered on the city’s outskirts, but due to the Eglinton Crosstown LRT development, it’s now home to some of the most prominent real estate projects.
When the researchers took suburban employment centres into account, the areas that saw the biggest price jumps were ones that offered solid job prospects, but had poor transit options prior to the new line.
Areas that were close to the line, but lacked quality job prospects, didn’t see the same increase in values.
Homes closest to the stations also didn’t see the same price boost as those further out. The team suggests that this could possibly be due to the noise and traffic that comes with transit hubs, which make those nearby properties less desirable.
While many emerging metropolises struggle with steep costs when developing rapid transit projects, research shows the projects can generate value in others ways such as through property taxes, which increase along with rising home values.
The researches state that public transit can help mitigate transportation costs for citizens and urban sprawl.
“In fast-growing cities around the world, people are commuting from the suburbs to employment centres and that’s costly,” said Zhang. “Public transit can mitigate the problem by connecting downtown employers with people in the suburbs, and by accelerating the development of suburban employment centres.”