Anticipated Capitalization of the Santiago Metro System on Housing PricesFiscal Studies (2008)
AbstractHousing units with closer access to public transportation enjoy a higher market value than those with similar characteristics but poorer access. This difference can be explained by the lower cost of transport to the main workplaces and shopping areas in town. For this reason, investments in public transport infrastructure, such as building a new metro line, are capitalized totally or partially into land and housing prices. This work empirically analyses the degree of capitalization into housing prices of the benefits of the new Line 4 of the Santiago metro system, which began operating in December 2005. We focus on anticipated capitalization into housing prices at the moment construction of Line 4 was announced and at the moment information on the basic engineering project was unveiled, identifying the location of the future stations. We use a unique database containing all home buying and selling transactions in the Greater Santiago area between December 2000 and March 2004. The results show that the average apartment price rose between 4.1% and 7.9% after construction was announced and between 3.9% and 5.4% after the location of the stations was identified. This increase was not distributed evenly, but depended on the distance from the apartment to the nearest station. An indirect effect of this kind of capitalization is that property tax collection will increase if property is reappraised following the price rise. This effect is not negligible in magnitude and could represent 11% to 17% of investment in the new metro line. This raises an interesting discussion on how the metro network extension is financed.
Citation InformationClaudio A. Agostini and Gaston A. Palmucci. "Anticipated Capitalization of the Santiago Metro System on Housing Prices" Fiscal Studies Vol. 29 Iss. 2 (2008)
Available at: http://works.bepress.com/claudio_agostini/11/