Measuring the impact of heavy rail transport infrastructure on house prices in Melbourne, Australia: a case study of Mernda rail extension project

Abstract

PurposeThe research examines the impact of heavy rail transport infrastructure on residential property prices in Melbourne at different stages of project development using the Mernda Rail Extension Project as a case study.Design/methodology/approachA difference-in-difference approach is used to quantitatively measure the magnitude of change in the house price at different stages of rail transport infrastructure project development.FindingsWhen controlling for a range of structural, neighbourhood, and locational attributes, the authors find that properties within 800 m from the proposed train station are 8.7% higher in value than those outside 800 m (but within 1,600 m). However, during the project's construction, the project's benefits in the form of house price appreciation are not fully realised. “Unrealised benefit” is attributed to the negative externalities of construction works and apprehensions associated with the project's shelving and time delays.Research limitations/implicationsDepending on the availability of data on residential property transactions in the future, a spatial analysis of rail infrastructure's radius of catchment effect is needed.Practical implicationsFindings from this research are beneficial for policymakers concerned with transport and land use planning, property valuation for taxation and mortgage purposes.Originality/valueThis research contributes to the knowledge of the impact of the rail project on house prices in Melbourne. While there are earlier studies on the topic, there is limited understanding of this prime Australian city attractive to domestic and foreign investors.