How Do Users Value a Network Expansion? Evidence from the Public Transit System in Singapore

Abstract

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“…The present value of the appreciation is much larger when the calculation incorporates the effects across the entire network. This result is consistent with Fesselmeyer and Liu (2018), who argue that considering only housing price appreciation in newly connected areas ignores significant benefits from rapid transit expansions.…”

“…The average simulated price increase for newly connected CTs is 2.14% of the observed average 2001 prices in these CTs, and this value is 1.67% for pre‐connected CTs. This percent increase for pre‐connected neighborhoods is similar to the results of Fesselmeyer and Liu (2018), who find that an expansion of the Singapore rapid transit network increased prices in pre‐connected apartments by 1.5–2%. For newly connected CTs, our estimates are at the lower end of the range of estimates found in the reduced‐form literature discussed in Subsection 2.3.…”

“…For pre‐connected neighborhoods, our results suggest that the rapid transit expansion increases prices by 12.98% and increases mean income by 11.63%. For comparison, Fesselmeyer and Liu (2018) find that an expansion of Singapore's commuter rail line network increased the price of apartments within 500 m of an existing station by 1.5–2%. In summary, our reduced‐form price estimates motivate our structural analysis of price appreciation in both pre‐connected and newly connected CTs, whereas the results for average income emphasize the importance of incorporating endogenous income changes in our model.…”

“…However, there is also evidence that the benefits of improved network connectivity are capitalized into prices in neighborhoods with a pre-existing connection. Focusing on dwellings that already have access to Singapore's rapid transit network, Fesselmeyer and Liu (2018) find that extending the network increases dwelling prices, and argue that these benefits to pre-connected areas should be included in cost-benefit analyses of extensions. With counterfactual simulations of our residential sorting model, we analyze two opposing effects on the demand for pre-connected neighborhoods.…”