The effects of R+P projects on residential property value : an empirical analysis using hedonic price model

Abstract

Rail plus property (R+P) development has been widely established in Hong Kong over the past 40 years. Today, Hong Kong is proudly one of the city which is internationally known for its successful application of the R+P model, where over 26% of the MTRC’s profit comes from property development (MTRC, 2014). It is generally recognised that R+P has greatly benefited the city, especially on real estate market where appreciable housing price premiums were observed by scholars. Yet, there is lack of comprehensive and up-to-date study which takes all R+P projects in Hong Kong into research interest.

This study thus aims to fill the research gap and carries out empirical study to grasp the explicit influences of R+P development on residential property value in Hong Kong using the hedonic price model. More specifically, this study examines 29 railway stations across 8 railway lines, which covers a total of 44 R+P properties and 75 random sample of non-R+P properties in the territory. The hypotheses are tested by hedonic price models across seven study areas using the sale transaction data as at 2015.

The analysis has revealed that the impact of R+P to property value could be positive or negative based on the location of the study area. Positive price effects of R+P range from 3.3% to 34.3% were found in five study areas whilst negative price effects range from 6.8% to 7.3% were found in two study areas. In addition, synergy effect is observed when R+P is associated with high-quality urban design and comprehensive master planning; whereas the lack of TOD features in R+P is likely to result in negative price effect.

The empirical results suggested that R+P, in association with comprehensive master planning and TOD designs, tends to capture higher benefits and are worth promoting in Hong Kong. Also, as R+P captures significant profits, reasonable actions are encouraged to optimise the allocation of profits not solely for re-investment purposes, but more importantly to promote broader social interests.