In Finland, there is an active discussion about the economic effects of transport projects. Between 2015 and 2017, around 1,4 billion euros were invested in the transport system per year. The decided and planned large rail traffic investments have generated interest in the real estate development benefits resulting from the projects. The new report identifies guidelines for assessing the real estate market effects of transport projects.
The work found out at what level assessment is possible in Finland. The work included a small-scale pilot study on the effect of accessibility on apartment prices. In addition, the usability of office space rental data in impact analyzes was investigated.
The traffic benefits of the transport projects and the real estate market benefits partly overlap, as the benefit of the reduction of transport travel times is transferred to the value of the land. However, traffic projects do not automatically lead to real estate development. The prerequisite for the effects is that the development of land use is made possible and that companies and the labor market are able to utilize the accessibility advantages created through the transport project.
For example, zoning and related infrastructure and service investments must enable additional construction and thus create the conditions for the effects to occur. For this reason, the probability and schedule of additional construction must also be taken into account when evaluating and prioritizing projects.
In the report, the experts present three levels of recommendations for developing the impact assessment of transport projects. The recommendations are related to 1) generating new information through project-specific post-evaluations, 2) researching the interaction processes of traffic and land use, and 3) opening data sets for use.
Information on the effects of transport projects on real estate prices and rents should be collected through systematic ex post evaluations. The effects of the measures on the real estate market differ from each other and depend on the traffic effects of the project and the land use of the affected area, as well as the conditions for the development of land use. Tools for predicting real estate market effects and for better targeting of transport projects can be developed by collecting impact information systematically.
The phenomena behind changes in the value of real estate in transport projects must be better understood in order to get the greatest possible benefit from the investments. These phenomena include, for example, the effects of different modes of transportation on the development of accessibility in the long term; additional construction caused by the transport project; how different groups of people are able to take advantage of the transport investment made or the differentiation of residential areas triggered by the increase in rents caused by the transport project. An important question is also to whom the increase in value caused by the transport project will accrue and how this increase in value will be distributed fairly.
Sustainable and smart urban development requires research on the effects of traffic on the real estate market and community structure. Research also requires the development and systematic opening of data sets. Although Finland has extensive materials on the real estate market and traffic, there are also clear gaps in the materials and their availability for research use should be enhanced. In addition, during the production phase of the materials, attention should be paid to the more versatile possibilities of using the materials.
The research report is published on www.flou.io/kiinto
Research background
FLOU Oy, Kaupunkitutkimus TA Oy and Aalto University jointly carried out a study on the real estate market effects of transport projects. The commissions for the study are Rakennusteollisuus RT, the Ministry of Transport and Communications, the Finnish Railways Agency, the Confederation of Finnish Business, Helsinki Region Transport, the Association of Finnish Municipalities, the Finnish Construction Association, RAKLI and Suomen Yrittäjät. The research has received funding from the Finnish Confederation of Employers (TT) Foundation. In the study, accessibility was modeled using the traffic forecast model for the Helsinki region maintained by HSL. The price data for apartments was obtained from the databases of the Finnish Federation of Real Estate Agents, and the rent data for offices from KTI Kiinteistötieto's databases.
More information about the research is provided by project manager Taina Haapamäki, FLOU Oy, tel. 050 377 8123, taina.haapamaki@flou.io