Announcement, construction or delivery: When does value uplift occur for residential properties? Evidence from the Gold Coast Light Rail system in Australia
Introduction
Urban settlements are the powerhouses of our economies and their ongoing sustainability depends on the ability of citizens to access goods and services. This accessibility is particularly important to the Gold Coast, Queensland, Australia where the economy is heavily dependent on tourism and the ability of tourists to access the different attractions.
Australian cities are typically low density and suffer from urban sprawl, much as in the US and in contrast to the more compact and mixed-use cities often found in Europe. In recent years, the increasing number of private vehicles has made public transport development more imperative because of traffic congestion problems, safety issues, oil vulnerability, and environmental pollution. A well-developed public transport system can deliver broad economic and social benefits to communities, including cost savings associated with reduced traffic congestion, increased productivity through job creation, competitiveness and liveability. However, the growth and development of public transport are heavily conditioned by available funding sources, particularly as infrastructure provision is very expensive. Traditional funding sources such as fuel taxes or income taxes are either inadequate or have competing pressures to meet the demands for sustainable public transport development.
These imperatives have driven the investigations for alternative funding and financing mechanisms, one of which is value capture (Enoch et al., 2005; Smith and Gihring, 2006; Iacono et al., 2009; Zhao et al., 2011, Zhao et al., 2012). Smith and Gihring (2006) describe value capture as the “appropriation of land value gains resulting from the installation of specific public infrastructure improvements in a limited benefit area” (p. 752) and the partial use or total use of these revenues to fund improvements. In short, value capture utilises the increased value of nearby properties that benefit from better accessibility as a result of public transport provision. The interest in this mechanism in Australia has led the New South Wales (NSW) government to re-label value capture as “value sharing” to emphasise the mutual benefit nature of the uplift and its capture.
Although the literature contains a considerable number of individual case-study investigations as to the nature of the uplift brought about by increased accessibility, the results are quite varied (and discussed below in the literature review). However, when the uplift to land values occurs is under-represented in the literature. This aspect is however particularly important for informing policy. For residential properties, does the uplift occur upon announcement of a project, the delivery (as characterised by the building of the project) or its opening when citizens can finally use it? It is likely that the timing will be different for commercial properties where it is more likely that entrepreneurs will internalise any uplift in their business plans and activities. The aim of this paper is to quantify when residential property value uplift occurs by using Gold Coast Light Rail Transit (GCLRT) system in Queensland, Australia as the context.
The paper is structured as follows. The next section provides a state of the art literature review for land value uplift for public transport investment in terms of mode, quantity and timing of uplift and the sort of factors which influence these aspects. The paper then turns to the case context of the GCLRT system before addressing the methodology adopted and the data used in this analysis. The results are then provided and interpreted. The final section discusses the results and concludes with recommendations for future research.
Section snippets
Literature review
The theoretical underpinnings of value uplift, where land value increases as a consequence of improvements in accessibility, derive from the land rent theory of Alonso (1964) and Muth (1969). In essence, rents are higher for land with higher accessibility since this offers land holders greater opportunities in terms of destinations. This theory therefore underpins the notion that investments in high-capacity public transport systems will generate positive ‘uplift’ in land values for surrounding
Study area
The study area encompasses the GCLRT Stage One operation which connects the Gold Coast University Hospital in the North to Broadbeach in the South as shown in Fig. 1. The GCLRT Stage One is a single 13-km line of 16 stations which opened to the public on 20 July 2014. The Stage Two of the GCLRT system began construction in mid-2016 and it is a 7.3-km northern extension of the track to the Helensvale heavy rail station (which provides interchange to Queensland’s capital city, Brisbane).
Timeline of GCLRT system
The
Difference-in-differences model
The objective of this paper is to evaluate the incremental effects of accessibility to a light rail network on residential property values over time. The difference-in-differences (DD) model contains an interaction term that is the product of the group and time indicators, with the DD indicating as a difference in the differences between groups across time (Puhani, 2012). More specifically, DD models are employed to investigate whether there are significant differences between a treatment group
Results
The estimation results of the DD model are presented in Table 3. Overall, the model fit is quite good with an adjusted R-square of 0.612 showing that 61.2% of the variation in the data is being explained. This study has required comparable data for each of five time periods: the unexplained variation is potentially due to data limitations leading to an inability to include many more amenity variables particular to the Gold Coast environment. The estimated parameters also have the expected signs
Discussion and conclusions
This paper uses a DD model to identify the impact of the LRT system on residential property prices in Gold Coast, Australia. While controlling for other price determinants including property attributes, neighbourhood characteristics and accessibility attributes, the DD model shows that the property price in the catchment areas starts to increase after the announcement with the highest increment being found after solid financial commitments have been made by government. Property prices then slow
Funding
This research was supported partially by the Australian Government through the Australian Research Council's Linkage Projects funding scheme (project LP150100078) and by the Queensland Department of Transport and Main Roads, Transport for NSW, Gold Coast City Council and Queensland Airports Limited. This research also contributes to the research program of the Institute of Transport and Logistics Studies, specifically the TfNSW program in ITLS associated with the Chair in Public Transport.
The
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2022, Transportation Research Part A: Policy and PracticeCitation Excerpt :Similar to Murray and Bardaka (2021), our analysis provides annual estimates of the average treatment effect, between a minimum of ten years before the announcement of an LRT line and a maximum of 12 years after the beginning of operation. This allows us to explore in detail the temporal distribution of the effects and to statistically test the parallel-trends assumption for the years prior to the appearance of anticipation effects which can take place during or even before the announcement period (Yen et al., 2018). In addition, we estimate aggregate average treatment effects for each time period of interest, including pre-announcement, announcement (time period after the LRT route and station locations are announced but before construction begins), construction, and short-term and long-term operation periods.