Imagine you leave home, get in your car and drive for an hour. The roads in your area are so bad that you only get as far as 17 km. If that is the case, then unfortunately your property probably isn’t worth much…
We’ve looked at the relationship between transport infrastructure, both public and private, and property prices across more than 9,000 areas of the UK. We found that relationships between ‘accessibility’ (how far you can travel) and property prices do exist, but not in a consistent fashion. We found that there is a substitution effect between public and private transport. We also found that in areas where public and private transport had comparable range, changing the range of public transport had the largest correlation with changing property prices.
We created an index value for each postcode sector in the UK, which defined how many square kilometres (sq km) you could, in theory, travel using either a car or public transport. We then plotted these data against prices in each location.
For example, SW3 1, the London neighbourhood that has the famous Harrods department store, has an average price of £3.9m, and from there it is possible to travel 265 sq km in an hour by public transport, and 2,343 sq km in a car. The reason for being able to reach 9x more area by car is the point-to-point nature of driving, as opposed to the hub-hub nature of public transport.
Put more simply, the journey in a car is a contained journey: you get in, drive – off-road if you really need to – and get out pretty much exactly where you want to be. With public transport it may be necessary to walk, get a bus, change trains and walk again at the end of the journey, greatly reducing the range of distance achievable in an hour ‘door-to-door’.
Let’s look at the 300 least accessible places in the UK from the perspective of a driver. A large number of these are Scottish islands (they may be beautiful and offer great whisky, but they aren’t very easy to travel to and from); many are rural areas elsewhere in Britain; and many are central urban locations – for example, the central London postcodes of EC2V, EC3V, EC2Y and EC2R are all in the top 10 of our ‘least accessible 300’.
From these data, the rough trend (see above graph) shows that there is a corresponding £1,300 increase in house price for each additional 1 sq km that can be travelled by car in the space of an hour from these locations. It is interesting to note that there is no discernable relationship when we expand this to the rest of the UK, nor when we look at the areas that are most accessible by car.
What this means is that, in generally hard-to-reach/hard-to-leave places, there may be a significant premium to pay for slightly more accessibility.
Visualised another way, the chart below shows the average price for properties in the 300 hardest-to-reach/leave locations, grouped to the nearest 10 sq km. The vertical axis shows prices; the horizontal shows driving coverage.
With public transport, we discovered the exact opposite! We found that in areas where public transport services were relatively poor (again, many rural areas), improvements to these services had no effect on property prices. It can be assumed that there is a substitution effect between driving and public transport – put simply: people who are already reliant on cars aren’t likely to take advantage of any improvements to train, bus or tram services.
However, we found that in areas with good public transport (we used the top 300), there was a positive relationship between accessibility and prices. The areas with the best public transport were unsurprisingly urban areas – with central London postcodes making up the entire top 25. This highly urban concentration resulted in higher prices for our comparison, as shown below.
Here, we found that for each additional 1 sq km in distance that could be covered in the space of an hour, there was a corresponding £8,030 increase in property price.
In the areas where public and private transport are relatively equal in their ability to cover ground, we found that there was an exponential increase in price relative to the improvement in public transport services. For example, in areas where it is possible to travel 10x further by car than by public transport (vertical axis), the average property price is £649,601. At 5x the distance, it is £1.08m, and at 2x the distance it is £1.2m.
So what does all this mean? Well, in areas where public transport is average, such as in those areas where a person can drive 7-9x further by car, it should be possible to greatly increase property values by improving public transport so that the ratio falls closer to 5-6x. Assuming that there is a level of causality between transportation and property values, we can see that by improving the range of public transport by 30% (moving from 9:1 to 6:1), the average price could increase significantly (see above graph).
Interestingly, this level of sensitivity does not exist for areas where driving is considerably more productive than using public transport (the line after 30x remains quite flat). This may indicate that improving public transport in areas where it currently does not exist could have no impact on prices. However, the counterintuitive nature of this statement leads me to believe that the effect may simply take some time to exhibit itself, and that we have not measured the transition in values – only a snapshot of the value of different areas, relative to their transport links, at a point in time.
Like what you’ve read? Sign-up for our weekly newsletter by clicking here!
© Treex 2020