Investigation of the impact of railways on housing values; the case of Istanbul, Turkey

Abstract

Housing units located near transportation facilities tend to have a higher market value than those that are at a greater distance to transport facilities but have similar characteristics. Provision of public infrastructure has a great impact on urban areas, especially on urban development patterns, spatial distribution of urban land use and real estate values. Mass transit systems are one of the most important public infrastructures in cities. Mass transit operations have a significant effect on property values, since they increase accessibility in urban areas. Railway projects are long-lasting investments and by their nature are extremely expensive when compared to other land transportation modes. It is not always possible or reasonable for many countries to fund these high-price projects only with their national budget generated by taxes collected from all citizens. Literature suggests that property values tend to rise in parallel to land values after any kind of public infrastructure investment. Nowadays transportation, especially railway system investments, is regarded as the most important public infrastructure in urban areas impacting land values maximally. Railway investments are becoming widespread in Turkey, especially in Istanbul as Istanbul is the most important and most populated city in country. As due to their high operation costs urban public transport systems, especially railway systems, rarely make a profit, private investors are not willing to get involved in these projects. Furthermore, it is not possible to finance all rail system investments from public funds. This article aims to prove the impact of railway systems on housing values and investigate the possibility of internalizing this increased value for financing railway investments. The main objective of this article is to calculate the impact of distance to a railway station on the value of properties by using the hedonic price model on an existing railway corridor and applying this anticipated impact on a proposed railway corridor. Finally, the calculated value is used as a prelimi- nary basis as a funding model for railway projects in developing countries like Turkey.