Date: 13 Aug 2013

Measuring the effects of transportation infrastructure location on real estate prices and rents: investigating the current impact of a planned metro line

Abstract

The importance of modeling the interactions between transportation infrastructure and land use has been demonstrated through a large number of studies. The aim of this paper is, on the one hand, to measure the effect of transportation infrastructure and land-use characteristics on dwelling prices and rents in Thessaloniki, Greece, and, on the other, to investigate the current impact of a future metro line on the area. The results reveal a negative effect of the proximity to port and railway station on property prices and rents, and a positive impact of the proximity to the airport. The metro line, which is still under construction, has a negative impact on the purchase prices, while it does not significantly affect the rents. In the first case, this can be attributed to the negative externalities generated by the construction, which is generally not expected to be completed within the next 5 years, a fact that keeps the expected demand in low levels. This conclusion comes in accordance with other research works based on surveys in the area. In the second case, the variable is insignificant since rents are often short term which means the future implementation of the metro does not affect the candidate tenants’ decision. For the purpose of this research, spatial econometric models are applied. Such models have been neglected from inclusion in the existing Integrated Land-Use and Transport Models (LUTI), which are used for predicting the effects of transportation policies. The results indicate that such models are able to capture the existing spatial autocorrelation (unlike the linear regression) and the authors suggest their use in LUTI models.