Do you agree that the land market values accessibility?
Australia has a reasonably efficient market for land and housing, which can provide values for accessibility and therefore transport infrastructure.
The housing market values a range of attributes, including dwelling type and size, dwelling attributes, density of living / size of land, and location. One of the simplest measures of location is distance from the CBD. The Reserve Bank of Australia has published papers showing how house prices vary with this measure of location.
In Australia, local government charges in the form of property rates are levied on unimproved value of land, so it is necessary to assign an unimproved value to land. For residential land, this involves taking off estimated price of housing from house sale prices.
Housing prices reflect a wide range of attributes, as evident from hedonic pricing analysis.
The underlying (unimproved) value of land depends primarily on:
• land size, which can be normalised to unit area
• location, which reflects both amenity (how attractive, safe etc) and accessibility (how easy to travel to other places).
In Sydney, distance from the CBD is strongly correlated with unimproved value of land per square metre, as shown in the following figure. There are a few suburbs that are outliers, due to special features such as sea-views or harbour-views.
Look at this another way. The relationship between land value and accessibility enables us to value infrastructure that improves accessibility. Click here to read more or contact Strategex for more information.