Land and housing price increases due to metro effect: An empirical analysis of Santiago, Chile, 2008–2019

Abstract

This research investigates whether properties near metro lines in Santiago, Chile, are sold for higher prices. To achieve this, a multiple regression analysis is carried out, considering fixed and temporal effects, comparing data within and outside a 1 km buffer zone around each metro station. The study focuses on three variables: (1) capitalization by landowners, (2) capitalization by apartment prices, and (3) a "land incidence" ratio, which is the proportion of land cost-to-apartment prices and acts as a proxy for residential density. The results indicate a positive correlation between metro proximity and capitalization by landowners and apartment prices, at 5.1% and 9.2%, respectively. However, the land incidence shows a negative correlation of − 11.8%, which suggests that apartment prices and residential densities increase more than land costs near metro stations. An approximate estimation also finds 23.5% higher premium to developers within the metro buffer zone, based on apartment prices, density, land cost, and average building cost. These findings support previous studies that show the positive impact of the metro on land and housing values. The study sees the influence of the metro in transforming Santiago's residential densities and private profits.