The impact of anticipated transport improvement on property prices: A case study in Hong Kong

The development and improvement of transport infrastructure leads to increase in cross-boundary social and economic activities, whilst it shapes the pattern of urban development. Improvement of transport infrastructure, which is meant to enhance the urban built environment, is presumed to bring positive externalities to property values in the vicinity. Based on a sample of 6310 transactions obtained from residential developments located near a newly-proposed transport infrastructure project in Hong Kong, this study investigates whether the potential property buyers are willing to pay a premium in real transactions for the expected benefits brought about by this proposed new transport infrastructure development before its completion. The results generated from a Hedonic Price Model suggest that this infrastructure improvement project has provided net positive externalities on the neighbourhood properties. More precisely, the announcement of the transportation improvement project did originate a net positive effect on the neighbourhoods' residential property prices. Potential buyers were willing to consider the 'expected' improvement of transport infrastructure as a positive factor in offering their prices for a property. This study throws a positive evidence on the perception about transport facilities and property prices:- the anticipated benefits brought about by transport improvements are capitalised into property values.