An empirical study on the impact on private property price of the different development stages of To Kwa Wan MTR station

Abstract

In Hong Kong, the Mass Transit Railway (MTR) is highly regarded by residents as a crucial public transport network. The presence of an MTR station often leads to increased property prices. However, early empirical studies have shown mixed results. While some suggests a temporary drop in property prices before the station’s service commencement due to construction noise and other negative externalities, some shows that prices may decrease during the completion phase due to overcrowding and ineffective management. Moreover, the magnitude of price increase varies across different development stages and can differ from city to city. This study aims to investigate the change in property price in the context of Hong Kong, focusing on the impact of the new To Kwa Wan MTR station. It examines whether property prices would show consistent increases at all stages (i.e. from Pre-announcement, Pre-construction, Construction, to Completion) and how the magnitude of this increase varies over time in response to the station’s operation. The relationship between property acquisition offers by the Urban Renewal Authority (URA) for redevelopment and the station is also studied. Hedonic price model using ordinary least squares (OLS) regression techniques is adopted in this research. The dataset comprises transaction data from the EPRC, covering the period from March 2007 to July 2022. All sampled buildings were completed before March 2007, which is one year before the announcement of the station. The study area covers a square with its four corners intersecting a circle centred at To Kwa Wan MTR Station, with a radius of 400 meters. The results of this study show a long-lasting increase in property prices associated with the new To Kwa Wan MTR station. Compared to the Pre-announcement stage, property prices would see an upward trends in all the following stages. The most substantial cumulative increase occurs during the Completion stage, followed by the Construction stage and then the Pre-construction stage. This pattern explains that the actual benefits of improved accessibility and convenience is important in driving the overall price increase. However, the rate of property price increase gradually slows down over time. The greatest rate of increase occurs right after the announcement during the Pre-construction stage. The diminishing rate of increase can be explained by that the market have absorbed the announcement stimulus, and the temporary negative externalities including such as road diversions, air pollution, and noise during construction. However such negative externalities do not outweigh the positive expectation effect capitalized in the property market. There remains a typical negative relationship between property price and building age. Despite the promise of redevelopment and potential acquisition due to the new station, relatively older buildings are still less sought after, meaning that homebuyers and individual investor might not prefer to speculate the relatively lucrative acquisition offers for redevelopment. An interesting piece of findings is that the real offers made by the URA would not increase in response to the station’s announcement, construction, or completion. This contrasts with the hypothesis that real offers would rise with the overall property price trend in To Kwa Wan, as the URA bases its offers on a notional seven-year-old flat in the same locality. This study offers valuable implications and contributions locally and to overseas cities implementing mass transit systems. The government, policymakers, and redevelopment authorities should be aware of the indirect economic benefits that come with railway development through taxation, the property market, and local business growth, when facing financial difficulties since railway development not only improves connectivity and accessibility but also has the potential to improve the neighbourhood and quality of life for residents through its induced urban redevelopment. The government must also ensure equity and fairness in the resumption of land for railway and induced redevelopment. When the government grants no rights for property development, the railway corporation should consider financing the railway project through property redevelopment. While property owners and individual investors should keep onto their properties for a longer period of time and should avoid investing in relatively older property, developers should purchase the property as soon as practice to maximise profits. Overseas cities should not the variations in institutions and cultures when it comes to public transport usage, even though this study indicates a comparatively significant price premium in Hong Kong.