Effect of public transit expansion on Real Estate Prices
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Transcript of Effect of public transit expansion on Real Estate Prices
TTC expansion
RSM 2128: Real Estate Economics
Arun Lamba, Jason Short, Pramod Jindal
December 12, 2012
Agenda
1. Executive Summary
2. Theoretical Background
3. TTC expansion
4. Evidence
5. Conclusion
12/12/2012 1
Executive Summary
Question • How will the TTC expansion project affect Real Estate Prices in the area?
Conclusion • Real Estate prices will be positively affected
Major Insights • Price appreciation occurs within a specific boundary relative to access
points
• These boundaries are different depending on use
• Peak price increases typically occur three years after completion
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Theoretical Background
• Real Estate asset prices are based on Discounted Future Cash Flows
• Real Estate is unique because of its convertible end use
• Location is important in Real Estate
12/12/2012 3
TTC – Spadina Expansion
12/12/2012 4
Impact of public transit on subject area
Empirical evidences suggest that public transits do impact real estate prices substantially, however, the impact varies.1
• Income level of neighbourhood
o In low income neighborhoods, property values increase
o In high income neighborhoods, property values decrease
• Proximity
o Impact on property prices not seen beyond quarter or third of mile
o Perceived distance from station valued more than actual distance from station
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Impact of public transit on subject area
• Type of real estate (Residential vs. Commercial)
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-6%
-5%
-4%
-3%
-2%
-1%
0%
0 200 400 600 800 1000
Ch
ange
s in
Pri
ces
Distance from TTC Station (Feet)
Residential Property
0%
2%
4%
6%
8%
10%
12%
0 100 200 300 400 500 600 700
Ch
ange
s in
Pri
ces
Distance from TTC Station (Feet)
Commercial Property
Impact on the substitute area
Empirical evidences suggest that public transits expansion lead to suburbanization2
12/12/2012 9
Population Growth (1950-1990)
Whole Metropolitan 72%
City Center -17%
• This was partly attributed to the innovations in urban transportation infrastructure, particularly the construction of new highways
Downtown Toronto Sheppard West
Change in population by 2017
Without TTC Expansion With TTC Expansion
TTC’s expansion to Sheppard West would decrease the population density in Downtown Toronto and increase the density in Sheppard West
12/12/2012 11
Impact on Population Density
Downtown Toronto Sheppard West
Change in population by 2017
Without TTC Expansion With TTC Expansion
TTC’s expansion to Sheppard West would decrease the population density in Downtown Toronto and increase the density in Sheppard West
12/12/2012 12
Impact on Population Density
TTC’s expansion to Sheppard West would flatten the rent gradient from Downtown Toronto to Sheppard West
12/12/2012 10
Sheppard West Downtown Toronto
Rent gradient
Without TTC Expansion With TTC Expansion
Impact on Rent Gradient
Conclusion
• Prices will be positively affected by the TTC expansion project
• Population density in substitute areas will decrease whereas population density in Sheppard West will increase
• Rental gradient between Sheppard West and downtown Toronto will flatten
• Price appreciation will take up to three years
12/12/2012 13
Q&A
Thank You
12/12/2012 14