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DEVELOPING A METHODOLOGY TO CAPTURE LAND VALUE UPLIFT AROUND TRANSPORT FACILITIES
3. EXPERIENCE FROM OTHER STUDIES
3.1 Introduction
3.1.1 As part of the research, a critical review of relevant literature was carried out. The full details of this review are contained in Appendix 1, so this Section focuses only on the key points arising from this review. This covers 150 recent references on land values and public transport.
3.1.2 The findings from the literature review were used to refine the survey method, particularly in relation to developing the land value measurement method. The key results from the review are outlined below. It should be recognised, however, that the topic of land value and transport infrastructure is considerable, and in consequence the literature is extensive. A pragmatic approach therefore needed to be used, which balanced relevance and robustness with timescale constraints and interrogation criteria.
3.2 Key results
3.2.1 Table 3.1 overleaf provides a summary of the key issues identified from the review. Five key issues are identified, namely:
- Treatment of time
- Scale of effects
- Catchment area
- Methods and data
- Attribution of impacts
3.2.2 These are considered to be the key features that any land value measurement method needs to address. The means by which the proposed land value measurement method tackles these issues is outlined in Section 4.
3.2.3 Whilst this is a useful tool by which the key issues that need to be considered in any analysis of land value uplift can be identified, it does not provide sufficient detail in itself to develop firm conclusions on the topic. To do so requires a greater depth of investigation that looks at data, definitions, methods and actual case studies, to unravel what effects can be attributed to the transport investment.
3.2.4 This means that knowledge must be built up from a series of carefully constructed case studies. The literature review provides a top down perspective on the key issues, but it is only through the bottom up approach that the land value uplift effects can be isolated. In developing such a methodology, the key issues are summarised here, together with a commentary on their components and the areas of uncertainty.
Table 3.1: Key issues arising from the literature review
Key Issues | Components | Comments | Uncertainties |
1. Treatment of time | Time framework | Data are required for at least four points in time to reflect the base line situation (before), market adjustments prior to opening (before), and the actual outcomes in the short term (2 years) and in the longer term (5-10 years). | The market may over react prior to the opening so that values may actually fall in the short term. |
Cross section and longitudinal data | Repeated cross sectional data seems to be the most efficient source of information, and this data can be tagged into the contextual information on the construction and economic cycles. | It is possible to combine cross sectional and longitudinal data on property transactions. |
Analysis methods | Time is always difficult to handle in statistical analysis as cause and effect takes place over time. GIS methods can map change so that analysis can take place on the differential impacts by time and location. Hedonic pricing (HP) methods require data collection over different time periods and stronger assumptions on model coefficients. | |
2. Scale effects | Mode of transport | Rail, tram and metro investments provide a scale of investment that may have identifiable impacts on land values overtime - bus systems are less likely to have a measurable impact. In road schemes it may be harder to identify impacts as accessibility changes are small and as there may be access at all points along the route. Motorway investments with limited access may provide the best case studies. | Property market effects will not be ubiquitous and are likely to take place differentially along the route as other contextual factors link positively with the transport investment. |
3. Catchment areas | Distance from station or stop | Reasonably clear evidence existing on thresholds that are used - 800 metres has been used most commonly for commercial properties, but a longer distance of 1000 metres for residential property. Rate of decay difficult to determine as data is not available to investigate in greater detail. | May be some loss of value immediately around stations. |
Time from station, stop or interchange | Thresholds are related to walk time, usually assumed to be 5-10 mins for commercial properties and 10-20 mins for residential properties. | Most studies impose thresholds rather than allowing the data to "suggest" the key thresholds. |
Control areas and the counterfactual situation | One method has been to compare similar areas, one with the transport investment and the other without the investment. It is almost impossible to find similar areas as each seems to be unique, so control area analysis has been replaced by contextual analysis relating to the city/location as a whole. | In the UK, land uses tend to be mixed, whilst in the US there is extensive zoning for single use. The property market in the UK is more heterogeneous. |
4. Methods and data | GIS Analysis | Requires spatially disaggregated data at the unit postcode level, together with other variables that might influence value uplift. Available from the Land Registry (residential only) and the Valuation Office for both residential and commercial property transactions since 1996 in England, and the Register of Sasines. Value surfaces can be constructed from the data and linked with regression analysis to control for other influences. Most of the data are available from secondary sources. | Data at the individual property transaction level are required, but potential confidentiality issues - even though the output is at a more aggregate level. |
Hedonic Pricing | Requires disaggregated data for individual property transactions, together with other relevant data. Although available from the same sources, supplementary primary data may need to be collected. There may also be difficulties with time based analysis and reconstructing the past. | Likely to use less data, but requires primary data collection, including trying to "retrofit" for past points in time. |
GIS and Geographically Weighted Regression | Allows GIS surfaces to be combined with regression analysis (Similar to HP) in a spatial mapping of change, whilst controlling for other effects. Stated preference techniques ('contingent valuation') can be used to supplement the above methods. | Note that all methods are totally dependent on the quality of data that is available. |
5. Attribution of impacts | Contextual situation | This should be seen as an input to the analysis, as impacts will vary between similar transport investments in different locations and at different times. There may be variable impacts within the same corridor. | To identify other complementary investments that might enhance value uplift. |
Accessibility change | Changes in transport accessibility can be easily mapped, but other key determinants may also influence value uplift (e.g. ownership patterns, site consolidations, yields and numbers of transactions). | To link accessibility change with other local economic factors. |
Additionality and displacement | Value uplift relates to transport induced changes in property and land values that is additional to the expectations of the market if there was no investment. One difficulty here is that more accessible locations might only succeed in transferring development from less accessible locations - there is no net increase. | This is where change as measured in a quantitative framework needs to be balanced with a more qualitative interpretation by the key stakeholders or agents of change. |
Longer term effects | Most concern seems to be with the immediate effects rather than the longer term effects. As time passes, attribution becomes more difficult, but the effects on regeneration and social exclusion (including income effects) should be included. |
3.2.5 The review of literature also revealed a number of other issues of relevance, which have informed the methodology, as well as being of more general interest and relevance. These are summarised below.
1. Much of the analytical and empirical research comes from the USA and Canada, and this has mainly concentrated on the commercial property market. It seems that the quality and availability of data from North America is good and allows the use of more sophisticated methods, including regression analysis and hedonic pricing.
2. The evidence from the UK and Europe is more varied, but does include individual case studies and comprehensive reviews. There seem to be less time series or repeated cross sectional data available for analysis. The use of more simple indicators such as transactional price analysis, growth assessment and projected rateable values has been explored.
3. Until recently, UK and European research has tended to concentrate on the transport impacts in terms of more traditional changes in demand patterns and the switching of travel to the new mode. There has been less interest in the property market effects. But this has now changed, with much of the recent work from key researchers and the property market sector itself being concentrated on the land and property value uplift effects of transport. This work has concentrated on the residential sector, where there is reasonable quality data from the land registry, the Valuation Office and other agencies.
4. From the extensive literature cited, 18 key references were selected for more in depth analysis. It seems that the expected effect on both the residential and commercial property markets is positive, but the range of impacts is very variable - from marginal to over 100% in the commercial sector from the North American evidence. In the UK the impact is seen as being positive, but there has been less emphasis put on exact amounts. However, some of this uplift may be due to the optimism of the markets rather than actual effects. Where possible, it is important to use transactional data rather than valuation data 2.
5. One conclusion here is that each study is different and the bringing together of results in the review has been difficult. It requires a greater depth of investigation that looks at data, definitions, methods and actual cases to unravel what effects can be attributed to the transport investment. This means that knowledge must be built up from a series of carefully constructed case studies.
6. The treatment of time is important in all studies. This is because changes will take place in land and property values in advance of the completion of the transport investment as developers and house builders will invest in the expectation of improvements in the transport infrastructure. Effects might also be expected immediately after the transport investment is opened, and further in the future as the full benefits are recognised. Ideally, data should be available from before the decision to build was taken and immediately after opening, as well as downstream. A continuous database is ideal, but data are needed for at least these three - and ideally four - points in time.
7. Catchment areas are also important. The impact area for residential developments seems to be wider than those for commercial developments. Depending on the investment, residential impacts could extend to 1000m, whilst those for commercial developments are likely to be concentrated in a 800m radius. There is also some evidence that residential property prices might be depressed immediately around the transport investment or station, often due to environmental factors such as noise levels.
8. Most studies seem to take a series of key thresholds as inputs to the study of where different types of impacts might be found. Only a few used the data to define the range of distances away from the transport investment at which impacts might be found.
9. Impacts are more easily identified for tram and metro investments than for bus investments. Most of the research has concentrated on urban rail systems. In the first instance, rail investments offer the best opportunities to test for the property market effects.
10. Although the analysis has produced variable results, there is also the question of attribution of impacts. It seems that the contextual situation is important and should be seen as an input to any analysis. Similar transport investments will have different impacts in locations where there is a vibrant local economy and where the economic conditions are less advantageous. The key question then becomes, what other actions are needed in an area apart from the transport investment to make a measurable impact in terms of value uplift?
11. Value uplift has tended to be looked at in the literature in a narrow way, mainly through changes in property and land values. Where possible, a wider range of measures should be used. These would include changes in accessibility, ownership patterns for land and property, site consolidations, numbers of transactions and yields, as well as the use of composite measures such as density of development.
3.2.6 To develop a robust methodology requires commentary on the contextual situation, an appreciation of the data requirements and limitations, a clear understanding of the issues relating to attribution, and some means by which the numerical results can be interpreted. This suggests a mixed quantitative and qualitative approach, as discussed in the next Section.
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