Tapping the added value of homes near railways could help fund transport links
Published 19/07/2016 | 02:30
The price or rent of a home depends on a huge number of factors. Some of these are specific to the building, such as its size or garden or energy efficiency. Others though, relate to the location.
Some properties are close to the coastline, some near schools - and enjoy a premium as a result. Others may be very close to a junction or a factory or a troublesome neighbourhood and enjoy a discount.
This report looks at the relationship between urban rail facilities and the cost of accommodation nearby.
It takes almost a decade of listings, both sale and rental, and all the various stations in the Greater Dublin Area. It also includes the Metro North stations, which while never built may have led to an 'anticipation effect' during the end of the Celtic Tiger.
What did this research find? Firstly, it found that, when looking at individual homes, there is clear evidence from the Dart and Luas lines that being close to train stations gives a benefit that is reflected in prices and rents.
The impact was up to 10pc for properties close enough - but not too close - to stations.
The effect differs by area - with a premium for homes near Luas Green stations but a discount near Luas Red stations. Not only that, there are important differences between the price effect and the rent effect. The Cherrywood Luas extension boosted prices even during construction, confirming an 'anticipation effect'.
Stripping away area effects, there is on average a greater premium for light rail stations than heavy rail.
Also, the further the station from central Dublin, the bigger the premium - although only marginally.
Lastly, there is evidence from Daft.ie sales listing that, at the end of the Celtic Tiger, when the Metro North was announced, it boosted the price of homes near stations by 8pc. As the chances of the Metro being built faded, this turned into a significant discount of 20pc by 2010.
Why does it matter whether prices and rents reflect urban rail amenities? Other than general curiosity, it is a topic with important policy implications.
In particular, understanding the benefits of being close to rail stations matters for making the case for new rail stations.
It also has implications for how they can be funded.
In the case of urban rail systems, user charges typically cover operational costs but only make a small contribution, if any, to the fixed costs of building the system. This leaves large costs of investment that are typically made up by the general taxpayer.
However, there are other ways of capturing who benefits from public investment, such as looking at the upswing in property values near a newly built amenity. In principle, the cumulative upswing in property values brought about by the Dart or Luas should result in extra revenues through property tax (or a similar system, such as land tax).
Such a link would need evidence on what precisely that benefit is in monetary terms - hopefully reports like this can get that conversation started.
Ronan Lyons is Assistant Professor of Economics at TCD and author of the Daft.ie Reports