Measuring the effects of the light rail transit (LRT) system on house prices in the Klang Valley, Malaysia

Abstract

This research attempts to estimate the increased value of land in the form of house prices as a result of improved accessibility owing to the construction of Light Rail Transit (LRT) systems. Kelana Jaya Line LRT system is chosen as the case study in this research. Hedonic house price modelling and Geographically Weighted Regression (GWR) are employed to measure the effects of the LRT system on house prices in the Klang Valley, Malaysia (2004 and 2005 transactions). Selling price, structural attributes, land use and socio-economic attributes were collected from the Department of Valuation and Services of Malaysia database, selected maps and reports. Fifty-five factors that are likely to influence house price were identified and used to measure the overall effects of the LRT system on house prices. However, only significant variables were included in the final deliberation and these were identified by using correlation analysis and step-wise procedures. The outcome of this study shows a positive relationship between the existence of the LRT system and house prices. In short, people are willing to pay a higher price in order to live within close proximity to a rail transit station. The hedonic house price model suggests - for houses that are located within two-kilometre radius - prices decrease as the distance increases from the LRT station; for both straight-line-distance and network-distance. However, since hedonic house price models are global, the results produced by the model are applied equally for the entire area, and therefore may hide important local differences in the determinants of house prices. Spatial processes are instead seen to be heterogeneous in which the measurement of a relationship depends in part on where the measurement is taken. The generalisation of the effects of the LRT system on house prices is found to be consistent when it is examined further by employing a GWR model, which reveals that house prices decrease only for majority of houses located in the Petaling Jaya area and high-rise units located in Bangsar and Kerinchi. Yet, the majority of houses located in Wangsa Maju-Maluri area are found to be not affected by the existence of the LRT system. The GWR results indicate a statistical significant improvement over the global model for both straight-linedistance and network-distance models even after taking into account the extra degrees of freedom. The highest significant positive price premiums are found in houses that are located within 1,001-1,500 metres of straight-line-distance and 501-1,000 metres of networkdistance. The findings summarised in the thesis have important implications for policy implementation. Firstly, the research findings provide justification for potential implementation of a Land Value Capture (LVC) policy; a policy that can be implemented in order to provide a funding mechanism for the new transport infrastructure. This is due to the fact that the construction of rail transit systems should not be viewed as a subsidised service for the poor but as an investment that returns a profit through increased land values. Strategies in a LVC policy that may be implemented include property and sales taxes, realestate lease and sales revenues, fare-box revenues, fees on everything from parking to business licenses, join development, tax increment financing, special assessment districts, equity participation and public-private partnership. This approach has become a common practice in some more developed countries such as in the United Kingdom (UK) and United States (US). Finally, having a method to measure the land value premium due to the improvement in transportation service can facilitate alternative options or scenarios to be assessed. For example, different transport schemes for the same route may give rise to different land value capture potential, which may, in turn, help determine which transport scheme to pursue. This study therefore contributes to the growing literature on the positive relationship between the existence of the LRT system and house price by providing more accurate, robust and reliable empirical evidence as shown in the approach and the outcome of this research. In particular, it has produced meaningful results by addressing the nature of spatial process; spatial heterogeneity.