Transportation Improvements and Property Prices

This article examines how transport improvements alter the demand for real property (land and floor space) at different urban locations and how such changes work in the real estate markets to change property prices when the urban economy is open or closed in population. In the context of the stylized monocentric model of land use, in which all jobs are assumed located at a central business district, we examine how a reduction in the per-mile cost of personal transportation affects land prices and the price of floors space, and how unpriced traffic congestion, and the pricing of congestion cause changes in land prices. The empirical literature on the effects of transport improvements on property prices is summarized by distinguishing between before and after studies of transport projects, hedonic analyses of property prices, and simulations with equilibrium models of the real estate markets that predict changes in property prices.