If We Build, Will They Pay? Predicting Property Price Effects of Transport Innovations
Paper No' SERCDP0075:
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Keywords: property prices; hedonic analysis, transport innovations, gravity equation
JEL Classification: H43; R40; R58
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In this study I develop a partial equilibrium approach for the prediction of property price
effects of transport network extensions. It combines a gravity-type labor market accessibility
indicator with a transport decision model that takes into account the urban rail network
architecture, allows for mode switching and relaxes the assumption that stations represent
perfect substitutes. The model is calibrated to the Greater London Area and is used to predict
property price effects of the 1999 Jubilee Line and DLR extension. A considerable degree of
heterogeneity is predicted both in terms of the magnitude as well as the spatial extent of price
effects around new stations. A quasi-experimental property price analysis reveals that the
model performs well in predicting the observed average accessibility effect. Relative
transport costs associated with distinct transport modes are identified from the data by
calibrating the model of observed property price adjustments.