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 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 non-linear relationship between distance to train station and property price and a disamenity impact for residences within 400 metres 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 auto-correlation 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