Property Valuation Foundation Concepts: Transit Impact Analysis

This report examines the impact of rail transit investments on property values, drawing on case studies from San Diego, Beijing, London, and Klang Valley. It explores how the construction of light rail transit (LRT) systems and other transit infrastructure influences land values and real estate development. The findings indicate that proximity to transit stations often leads to increased property values, with premiums varying based on land use, location, and socioeconomic factors. For example, San Diego's light rail Trolley system saw land value increases of up to 91% near downtown Coaster stations, while Beijing experienced an average price premium of 5% for properties near LRT systems. The report also highlights the role of zoning regulations and market constraints in shaping the relationship between transit investments and property values. Desklib provides access to this and other solved assignments for students.

Running head: PROPERTY VALUATION FOUNDATION CONCEPTS
Property Valuation Foundation Concepts
Name of Student:
Name of University:
Author’s Note:

1PROPERTY VALUATION FOUNDATION CONCEPTS
Executive Summary
It has been discerned that public transportation is viewed to be significantly important in
“Europe, North America and Japan” allowing their “residents to travel from work and other
activities such as shopping, visiting relatives and friends, accessing schools and colleges,
healthcare, entertainment and recreation”. Some of the main discourse of the study have been
shown with such empirical evidence is obtained from major cities in the world including San
Diego, Beijing, London and Klang Valley. Some of the main findings of the study has revealed
that the land value increase with the construction of “San Diego’s light rail Trolley” system
varied based on usage of land and rail corridors. A premium of 91% over the land were accrued
in the areas near the stations that downtown Coaster. Additionally, 72% premium for the land
parcels near “Mission Valley Trolley stations” were duly observed. Some of the other increases
in property values were identified with premium of 4% near the “offices and retail
establishments” near the “downtown Trolley stations”. The study on Beijeing depicted that an
average of price premium of about 5% was observed for properties near the LRT systems, but no
statistical significant effects was depicted in case of “Bus Rapid Transit” (BRT). In addition to
this, the main findings revealed that the station proximity effects increase both the spatial extent
and magnitude at “stations further away from the city centre and at stations surrounded by low
and middle-income neighbourhoods”. For instance, a price premium of 10% was discerned on
low income station areas and suburban. In addition to this, post-construction of the Metrorail in
the “London Docklands”, the property values of in the “Isle of Dogs” increased from £ 70,000
per acre in 1981 to £ 4.9 million per acre in 1988. It is further seen that the construction of DLR
was focused to facilitate the transformation of “London Docklands” into a post-industrial
“financial, office, shop, hotel, leisure and housing development”. The main construction of this
Metrorail Project started in 1984 overall property price increase of £ 300,000 to £ 2 million per
acre. . The overall impact of the House Prices in the Klang Valley showed decreased in price as
the distance from transit stations increased for both network distance and straight-line distance.
However, as the assumptions of hedonic pricing model are global and results are applied equally
for the entire area, this may hide important differences among the determinants of house prices.
Moreover, the spatial processes were heterogenous in which the measurement of relationship
only depended on the part of measurement taken into consideration.

2PROPERTY VALUATION FOUNDATION CONCEPTS
Table of Contents
Introduction......................................................................................................................................3
Effect on Property Values Due to New Rail Investment- San Diego..............................................4
Effect of urban rail transit facilities in housing prices- Evidence from Beijing..............................5
Land value increase due to Docklands Light Railway (DLR)- London.........................................7
Effects of The Light Rail Transit (LRT) System on House Prices in the Klang Valley.................9
Conclusion.....................................................................................................................................11
References......................................................................................................................................12

3PROPERTY VALUATION FOUNDATION CONCEPTS
Introduction
As stated by Litman (2017), investment in “light rail transit (LRT)” system is often
considered as a tool to reshape the urban form for stimulating the real estate activity and
facilitating a more intensive use of land in a particular region. However, the key question of the
policy approach to this investment is led by to what degree of investment in LRT is able to
promote market led real estate development which suits the needs of “Transit Oriented
Development (TOD)” thereby leading to changes in property values. The location theory further
proposes that increased convenience to any transportation improvement results in higher cost of
the land near the transit stations. Moreover, in response to these higher costs the developers tend
to spread the cost across more tenants by increasing the density of structures they build around
the transit stations. A more simplified understanding of urban development team to be affected
with the several types of regulatory constraints such as zoning code and market constraints which
are directly related to project financing inducing real estate development (Connolly et al.2016).
To understand the financial implication of an LRT system, it is important to know how
the land use regulations is able to promote the development facility is which are in close
proximity to the rail transit. Typically, the public evaluation Project can process and accrue
significant benefits for the users with increased accessibility and mobility improvements. In
addition to this, the value is represented with mobility based metrices such as travel time savings
and total estimated benefits. If mobility improvement is able to compensate for the costs of
construction and operation then such a project is justified (Pdfs.semanticscholar.org 2018).
Common procedures to value the direct time travel are often considered with insufficient
magnitude to offset project costs however the leading planners often look forward to the areas
for measurable impact pertaining to increased real estate value. There are several empirical
evidences from real estate value benefits pertaining to fixed investment such as LRT and many
investigations have been able to find a higher real estate value in the adjoining areas of transit
stations in compared to similar parcels farther away. In several other cases, the “land use mix and
zoning overlay” are associated with the increased value of properties. Some of the main
discourse of the study have been shown with such empirical evidence is obtained from major

4PROPERTY VALUATION FOUNDATION CONCEPTS
cities in the world including San Diego, Beijing, London and Klang Valley (Huang and Yin
2015).

5PROPERTY VALUATION FOUNDATION CONCEPTS
Effect on Property Values Due to New Rail Investment- San Diego
In the recent decades a majority of the investment in light rail transit systems have been
done by U.S. cities for explanations beyond supplying an alternative to driving. This
phenomenon is supported by redesigning and building of environment for the “property led
economic development”. The empirical evidence on long-term land-use effects on LRT
investments in San Diego have claimed to suggest the changes in property values as a result of
dense multi-family residential aspects. Some of the other research aspects of the study had been
claimed with changes to local zoning and land use regulation thereby creating opportunities for
development that were previously outlawed (Xiao, Webster and Orford 2016).
The research has stated that public project investment such as LRT is often represented
with greater mobility and accessibility improvements for the users. The application of property
value is often presented with the mobility metrices like time travel savings which constitutes a
part of total estimated benefits to the users. The study has also suggested that in case there is
improvement to offset the cost of project construction and operation then such a proposition is
justified (Tsai et al. 2017). The typical methods of valuing the direct travel derive benefits are
considered to be of insufficient magnitude to offset the total project costs however there are
leading planners who are able to measure such an impact with the increased value of real estate.
The consideration of real estate development is seen as an outcome of mattresses which creates
favourable “cost benefit ratio” which qualifies for fixed rail transit projects while also permitting
localities to muster provision for specific transit “projects from a wider range of local actors who
are not primarily concerned with improving transport mobility”. However, it needs to be
assessed that when there is change in zoning due to TOD, disentangling the zoning changes with
real investment is difficult in nature. There may be cases that relaxing zoning constraints allow
for more profitable development due to the primary casual factors associated to increase in the
value of properties (Chen and Haynes 2015).
The research has been supported with several empirical evidences which shows real
estate benefits and evaluation of higher real estate values encompassing the transit stations than
at similar parcels situated at a considerable distance from the station. In San Diego, the real
estate values experienced an increase with close proximity to the “rail transit stations” in areas

6PROPERTY VALUATION FOUNDATION CONCEPTS
which were seen to be pedestrian friendly and declined in those which were auto oriented. The
important consideration of the study has further depicted that in areas where the land value has
increased near the “transit investment”, the households should be able to offset higher housing
costs with lower transportation costs. This is due to the fact of non-necessity of owning a
personal vehicle (Cohen and Brown 2017).
In addition to this, there are several studies for examining the impact of LRT in San
Diego region which is officially known as “San Diego Trolley”. Being one of the oldest LRT
systems in the US researchers found increased commercial activities in the adjoining areas of the
station but at the same time the “dense residential development” did not materialise near the
adjoining areas of the station. This theory suggests that due to a considerable increase in the
property values and high taxes charged by municipal authorities the land-use pattern for
residential users significantly decreased in the nearby areas of transit stations (Tsai et al. 2017).
As discussed by Nelson et al. (2015), the land value increase with the construction of
“San Diego’s light rail Trolley” system varied based on usage of land and rail corridors. A
premium of 91% over the land were accrued in the areas near the stations that downtown
Coaster. Additionally, 72% premium for the land parcels near “Mission Valley Trolley stations”
were duly observed. Some of the other increases in property values were identified with
premium of 4% near the “offices and retail establishments” near the “downtown Trolley
stations”. The most substantial bonuses were associated to the land development pattern near the
areas of retail shop, commercial uses and restaurants (Dubé et al. 2014). It is noteworthy that
commercial values tended to be “higher with higher income group and predominantly among
white neighbourhoods”. Several researchers have noted the importance of understanding the land
market impacts associated to measuring the benefits of LRT thereby “providing the evidence for
developing financial arrangements as a part of public-private development deals and assist in
creation of new infrastructure Finance related to such value capture” (Zhong and Li 2016).
Effect of urban rail transit facilities in housing prices- Evidence from Beijing
The urban rail transit facilities have a pivotal role for citizen’s social activities including
“education, residence and work”. Panel data on housing prices and urban rail transit facilities for
35 Chinese cities for 2002 to 2013 has been able to evaluate the impact of rail transit facilities on

7PROPERTY VALUATION FOUNDATION CONCEPTS
housing prices. A statistical correlational test has suggested significant correlations between the
rail transit facilities and housing prices. The main empirical results from the study shows that the
“rail transit facilities” such as LRT can remarkably elevate the prices of real estate. Different
results have been also able to imply that the other determinants such as “land price, investment in
real estate, population density and per capita GDP” have an influential role in determining
housing prices. The overall study has been able to suggest that particular reference to Beijing an
increase of 1% in the rail transit mileage elevates the housing prices by about 0.0223 %. The
various results of further shown that effects of expectation for new rail transit lines on housing
prices are insignificant in nature. The aforementioned findings have encouraged that Chinese
policymakers to consider “rail transit facilities” in achieving a sustainable “development for real
estate markets” (Nelson et al. 2015).
Several literature reviews of the study have been conducted with microlevel and
macrolevel studies on housing prices. The studies related to microlevel evaluation have focused
on how the transportation, building structure, amenity and education to the “central business
district (CBD)” act as the primary determinant for housing prices. The use of approach similar to
a study conducted by De Vany “on how amenity and disamenity should decay differently from
links and nodes of rail and road networks”. The authors have been able to examine the effects of
various types of proximity to the transportation nodes which are significantly associated to
property prices. Based on the function of distance from LRT and highway exits, the coefficients
for “distance band” have shown “inverted U pattern” which are consistent with “positive longer-
range distance-decay accessibility effects minus smaller, shorter range distance-decay disamenity
effects” (Nationwide.co.uk 2018). In case of Beijing, the educational resources along with
various other factors have influenced the real estate property prices which are a major lookout
for homebuyers, which significantly differs in case of other countries as China primary school
students are limited to attend school near the residence. Henceforth, Beijing consists of several
high-quality primary schools known as “school district house” which influences the buyers to opt
for real estate properties with close proximity to LRT systems with educational resource (Zhong
and Li 2016).
Beijing is regarded as the home to the oldest metro rail transit system in China
established in 1969. The initial construction was carried out support the capital’s defence system

8PROPERTY VALUATION FOUNDATION CONCEPTS
and transporting troops. In the later years, management rights were transferred to the local transit
company in 1977 for public transportation purpose. Post improvements of the rail transit process
in China after 2004 the urban rail transit system regarded as the expansion phase. The main data
was collected on apartment homes sold near the Beijing metropolitan area in 2011. The hedonic
price model was implemented to track the price premiums or discounts on properties related to
proximity of transit station. This model was used to collect cross-sectional data and found that
most of increase was seen in “properties near the rail transit”. The study has suggested a
difference in magnitude of premium varying due to the context of the research. The depictions of
the study have been able to suggest that there is a statistically significant “price premium
associated for accessing of rail transit station”. The study has further discerned that the proximity
effect keeps on decreasing as the administration fees goes up (Dubé et al. 2014).
The overall evaluation was able to suggest that an average of price premium of about 5%
was observed for properties near the LRT systems, but no statistical significant effects was
depicted in case of “Bus Rapid Transit” (BRT). In addition to this, the main findings revealed
that the station proximity effects increase both the spatial extent and magnitude at “stations
further away from the city centre and at stations surrounded by low and middle-income
neighbourhoods”. For instance, a price premium of 10% was discerned on low income station
areas and suburban. It can be concluded that rail transit investment in Beijing has able to act as
an effective strategy to reshape the urban spatial structure and future consideration for financing
in “rail transit investment” (Grube-Cavers and Patterson 2015).
Land value increase due to Docklands Light Railway (DLR)- London
In the UK, role of “Docklands Light Railway (DLR)” is conducive in providing the
various types of accesses to the rail transit system which led to subsequent growth in demand for
property in the Isle of Dogs area. The initial rail network constituted of DLR network linking the
“Isle of Dogs” with Tower Gateway situated in the edge of the city of “London, Stratford and
Island Gardens”. In most of the situations, the demand for property was assessed with the public
and private transportation corridors. The projections and plans for the development of Canary
Wharf was estimated with 46000 additional employees in the “Isle of Dogs” thereby giving
better transportation capacity and connection to the “London Underground network”. In several

9PROPERTY VALUATION FOUNDATION CONCEPTS
situations it was noted that proposed development in the London Docklands especially in “Isle of
Dogs” was seen with the continued expansion substantial provision for capacity to the Central
London. There are in subsequent DLR extension is observed banks across the city of London in
1991 (Kim and Lahr 2014).
Post-construction of the Metrorail in the “London Docklands”, the property values of in
the “Isle of Dogs” increased from £ 70,000 per acre in 1981 to £ 4.9 million per acre in 1988. It
is further seen that the construction of DLR was focused to facilitate the transformation of
“London Docklands” into a post-industrial “financial, office, shop, hotel, leisure and housing
development”. The main construction of this Metrorail Project started in 1984 overall property
price increase of £ 300,000 to £ 2 million per acre.
In addition to this, the building of Metrorail extension late 1990s from Manchester city
centre to Salford Quays waterfront redevelopment was partly financed by land contribution
development associated to housing, shops and leisure facilities. The overall project increased the
land values by almost £ 500,000 (Zhang et al. 2016).
Several research studies included from gravity type labour market accessibility model
investigated on prices of houses capitalisation effects. Based on the depictions of the study it was
found that urban rail network permits for transport mode switching and accounting for effective
accessibility offered by a station to predict the impact on property prices. A considerable amount
of heterogeneity was predicted both in terms of spatial extent and magnitude which affected the
price adjoining the new stations. Moreover, it was the experimental analysis on property prices
was able to reveal that effective capitalisation effects suggested various impediments on
transport planning (Knowles and Ferbrache 2016)
The empirical treatment of application of gravity variable on house price capitalisation
equation was used to interpret the main parameter selected for the further study. The several
depictions indicated that the elasticity of utility with respect to labour market on the property
prices were seen to be 12% with the introduction of DLR project. A second empirical study was
able to support the convexity of spatial decay due to the impact of nearby economic activity is
implied by exponential cost function in the adjoining areas of “light rail transit”.

10PROPERTY VALUATION FOUNDATION CONCEPTS
The application of gravity accessibility variables incorporated into the transport
infrastructure represented a useful model for assessment of the accessibility of the transit
stations. The overall findings of the study have able to determine that there is a statistical
significance between the proximity of DLR stations to the property values in the “Isle of Dogs”.
The main results of the study have further included the global regression analysis which has
showed a negative increase in the property values with increasing distance from DLR stations the
property is situated in “Isle of Dogs”. Some of the more important aspects of the study has
revealed the elementary analysis relationship of spatial distribution of the properties have plans
to the prices positively in some cases while negatively in other situations. There have been
several other depictions of servitude to the negative implication of property prices even with
proximity to the transit stations. One such as assumption of the research has been included with
noise pollution associated to the operation of DLR. Another important consideration has been
seen with increased car and fast traffic is related to the operation of light rail system. Based on
the studies the location of DLR stations may not be preferred by some of the property value
holders and thereby willing to sell such properties. In addition to this, the desirability of volume
of users of transit for the DLR stations may not be uniform throughout the city. Furthermore, the
zoning in proximity to the DLR stations need to be also taken into consideration (Hurst and West
2014).
Effects of The Light Rail Transit (LRT) System on House Prices in the Klang Valley
The research in Malaysia for the impact of light rail transit system has shown several
instances of increase in value of land in form of property prices. “Kelana Jaya Line LRT” has
been considered as the main evaluation for literature review section. The study has included
hedonic pricing modelling and “geographically weighted regression (GWR)” to assess the effects
of LRT systems on the property prices in Klang Valley, Malaysia. The different information on
the selling price, land use, structural attributes and socio-economic attributes they are gathered
from the “Department of valuation and services of Malaysia database”. This database was also
used to dig deep into the aim of the research and selected topography. In total, the study used 55
factors which were considered to be the main determinants affecting property prices and applied
to measure the overall effectiveness of LRT systems on house prices (Seo, Golub and Kuby
2014).

11PROPERTY VALUATION FOUNDATION CONCEPTS
The main outcome of the study inferred various positive relations with the existence of
“LRT systems” on the property prices. In short, it was discerned that people were willing to pay
a higher price within the close proximity of light rail transit station. The model suggested for the
properties with the inclusion of hedonic prices where located within two-kilometre radius from
the LRT station. “The overall depictions” showed price decreased as the distance from transit
stations increased for both network distance and straight-line distance. However, as the
assumptions of hedonic pricing model are global and results are applied equally for the entire
area, this may hide important differences among the determinants of house prices. Moreover, the
spatial processes were seen as heterogenous in which the measurement of relationship only
depended on the part of measurement taken into consideration (Dziauddin, Powe and Alvanides
2015). The overall generalisation of the effects of LRT systems on property prices were seen to
be consistent by employing of GWR model which revealed that the house prices decreased only
for houses situated in “Petaling Jaya” region and different types of high-rise units situated in
“Bangsar and Kerinchi”. However, the discourse of the findings was able to suggest that the
properties located in Wangsa Maju-Maluri were not affected with the LRT system. Furthermore,
the results of GWR revealed significant statistical improvement for the global model applicable
to the both straight-line distance and network distance even after consideration of freedom of
extra degrees. The study found that the highest positive price premium was discerned with
properties which were situated within “1001-1500 metres of straight-line distance and 501-1000
metres of network distance” (Nelson et al.2015).
The significant summarisation of the findings has been revealed with the policy
implementation. Firstly, the research has provided the rationale for potential implementation of
“land value capture policy (LVC)” which is the policy to provide a funding mechanism for the
new transport infrastructure. This is considered with the fact that “construction of rail transit
system should not be viewed as a subsidised service for poor work” rather considered as an
investment that returns a profit via increased values of the land (Eprints.lse.ac.uk 2018).
Significant strategies in the LVC policy has been able to indicate on the property and associated
impediments such as sales taxes, real estate lease and sales revenues, fare-box revenues, fees on
everything from parking to business licenses, join development, tax increment financing, special
assessment districts, equity participation and public-private partnership. This approach was
considered to be more common among other nations such as the United Kingdom and United