I was recently at an event hosted by the Urban Land Institute and Transport for London, and there was a question raised about the impact on property values made by the transportation infrastructure in London. Most of us assumed that there is a price premium people are willing to pay to be nearer to a tube or overground station, and some could even recount reading previous studies on the subject.
However, no one was sure exactly how much each tube station added to the price of a house, or if it varied with distance. One theory was that in fact people would like to live close to a station, but not too close. Intuitively, people want to minimise the time spent in transit to and from work, family, friends etc, so being near to public transport in a major city makes sense.
Yet most stations are on a busy street of some kind, or if not they create their own kind of hustle and bustle, so people would theoretically prefer to live near to a tube station, but not right on top of, next to, or opposite one. We thought this was interesting enough to investigate further, and could even present potential opportunities for those in the market.
First, the methodology. You’re probably familiar with a repeat sales index. We built one in the style of Bailey, Muth and Nourse, using a radius of 0-400m and a radius of 400-800m around a tube station. The first measurement being a circle, the second being more of a doughnut shape around the tube station. These distances correspond to either a five minute, or ten minute walk.
400m around High Street Kensington, about a 5 minute walk.
800m around High Street Kensington, about a 10 minute walk.
We repeated this process for every single tube station in the past 22 years, using only the stations which allowed us to obtain a reliable number of transactions (ignoring those with less than two repeat transactions in a month).
These were then compiled individually, and we calculated the difference between the most recent index value of the 400m radius and the 800m radius as a percentage. So if the 400m radius had increased by 500% over the past 25 years, and the 800m radius had increased by 600% then this would register as +20%, showing a preference to live further from the station. Conversely, a negative percentage means a desire to live closer to the station.
First let’s start with the example of the Piccadilly Line:
It’s probably quite small on your screen, because it’s one of the longer lines crossing the city from North to South West, which make it a great starting point to see how this process works.
For example, Turnham Green showed an index value of 7.07 over the past 23 years in the 400-800m radius from the station. However, within 400m from the station, the price index was only 1.88. There was a 274% difference between the two, showing that people preferred to live further from the station.
You can see that for the handful of stations in zone 4 and 5, beyond Arnos Grove, there is a preference to live closer to the station. Conversely, as you move towards zones 3 and 2 there is a preference to live further from the station. Locations which had less than 10% variation either way are marked in yellow and are not considered to show any particular preference.
Aggregating the values starts to make some sense of which locations (and how far from a city centre) that people start to prefer to live closer to, or further from the stations.