A novel hedonic price modelling approach for estimating the impact of transportation infrastructure on property prices

Abstract

Hedonic estimations of the effect of transport infrastructure on property prices vary widely. This high variability demonstrates a deficit in our understanding of these relationships, limits the utility of econometrics for the valuation of urban property markets, and limits the development and implementation of effective and fair market-based policy tools. Several avenues may lead to improved consistency: re-consideration of accessibility, inclusion of urban design characteristics, assessment of spatial dependence and spatial heterogeneity, and consideration of geographic scale. This paper outlines the rationale and opportunities for inclusion of, and presents empirical tests for, these assertions using a case study in western Sydney, Australia. Results show a number of urban design characteristics to be significant determinants of residential property price. Street connectivity and higher density in areas surrounding residences negatively impact price, higher density close to train stations positively impacted price in one model. Park-and-ride stations led to decreases in property values. Smaller study area results indicate a nonlinear relationship between distance to train station and property price and a disamenity impact for residences within 400 m of train stations. Relative accessibility measured as frequency of peak hour trains is a significant and positive determinant of price in the larger study area. Incorporation of a price trend surface and estimation using a spatial error model reduce the extent to which spatial autocorrelation overstates the effect of a train station on prices. These conceptual and empirical improvements further develop our understanding of the effect of transport infrastructure on property values.

A new toolkit for land value analysis and scenario planning

“…The nexus of infrastructure and increased property values has long been a justification for a taxation structure that taps into the latter to fund the former. In the current era of tighter government budgets, this source of funds has become increasingly appealing (Lieske et al, 2018(Lieske et al, , 2019.…”

“…As both use cases have similar foundations in property assessment and land valuation, we drew upon standard functionality built on hedonic price modelling (HPM) -a form of multi-variable regression that uses a market indicator (i.e. sale price) as the dependent variable and quantifiable measures of property characteristics as the independent variables (Lieske et al, 2019). The study encompassed four local government areas: Parramatta, Blacktown, Penrith and the Hills Shire Councils in Western Sydney (Figure 2).…”

“…The descriptive statistics for variables included in the property valuation models are provided in Table 1. These variables were chosen for a number of reasons including: (i) they have an anticipated contribution to property price variance, having been found to be statistically significant in other Sydney land valuation studies (Lieske et al, 2018(Lieske et al, , 2019Mulley et al, 2015); (ii) they were suggested by stakeholders during the model co-design, e.g. NAPLAN school results; (iii) they are potentially controllable and (iiii) they are not associated with serious multicollinearity issues.…”

Determining the Increase in a Building’s Appreciation Rate Due to a Reconstruction

“…Park et al [70] use the same approach again to determine the value of a park, or more precisely its effect on the value of property. Hedonic estimates are also used, this time with respect to transport infrastructure, by Lieske et al [71].…”

Borrowed sizes: A hedonic price approach to the value of netowrk structure in public transport systems

“…Railways offer high-capacity transportation but incur high fixed costs, and there is mixed evidence of the effects of such investments (Debrezion, Pels, & Rietveld, 2007;Higgins & Kanaroglou, 2016;Mohammad, Graham, Melo, & Anderson, 2013). Several explanations to these differences have been mentioned, such as different types of communications and different local context (Lieske, van den Nouwelant, Han, & Pettit, 2019). One reason for the differences is the extent to which investments contribute to achieving agglomeration economies (Chat-man & Noland, 2011).…”