Transport Fare Removal and House Price

Abstract

This paper studies the impact of abolishing tram fares in the city center of Melbourne (CBD) on the real estate market. Since January 1, 2015, tram users have not had to pay tram fares within the designated free tram zone. It is found that real estate unit buyers living in the outer fringe of this zone pay prices which are 10.1% to 13.6% higher compared with similar purchasers in other areas since fares were abolished. This positive price impact is muted for the residents who live closer to the core of the city. Quartile analysis shows that the gap between the fourth quartile and middle 50% group in price ranges from 13.2% to 14.4%. This is due to the geographic location of expensive units located close to the outer area within the free-tram zone where residents are more likely to benefit from the fare removal. Additional distance-based analysis finds that the average price level in the 250-meter buffer zone from the free tram zone boundary increases by 11.4% to 11.9%. When tested with a randomized date of fare removal, the level of price change is not statistically and economically significant. This confirms that the removal of the transport fare is clearly capitalized only in the area where real beneficiaries reside.