|M.Sc Thesis||Department of Industrial Engineering and Management|
|Supervisor:||Assoc. Prof. Bental Benjamin|
The objective of this research is to analyze the effect commuter railway services on residential real estate prices. Such effects have been found in the literature. For example, Gibbons and Machin (2003), found that the frequency of trains increases apartment prices by 0.1% for an additional train per hour for the London Underground, and by 0.3% for Docklands Light Railway.
This thesis maintains the assumption that train improvements increase the attractiveness of a city by reducing daily commuter costs, and that this will be manifested in increased value of residential real estate. The hypothesis is tested using data over the years of 1992-2002, for the cities of Netanya and Rehovot. The maximum number of train stops grew over this period by 289% in Netanya and by 700% in Rehovot.
The research used the Hedonic prices method which assumes that the price reflects the benefits derived from the good's characteristics. Here apartment prices are expressed as a function of classic Hedonic apartment-specific variables. In addition the model includes city-specific environmental and residential variables, as well as macroeconomic characteristics. Of particular relevance are variables that measure the development of the commuter trains, and specifically the frequency of trains in every town. Furthermore, the study includes the national train development budget.
The availability of trains in the cities is found to have a clear positive effect on the prices of apartments. An additional daily stop per day may increase apartment prices by as much as 0.39%. This effect is close to the one found (but per hour) by Gibbons and Machin’s (2003) for London. On the other hand, the train development budget over the period has no significant effect on real estate prices. This may be due to the fact that it is a national factor and not a city-specific factor.