The effects of improvement in public transportation capacity on residential price gradient in Hong Kong

Modernization of a railway line connecting the urban and sub‐urban areas will normally result in a shift of the population from urban to suburban areas. This will affect the price gradient of residential prices of two connected stations on the railway line. The actual effect cannot be theoretically deduced. Results of empirical studies in the past are not conclusive. Lack of good quality data is one of the many reasons. This paper seeks to contribute to the understanding of this issue by a case study in Hong Kong. The KCR (Kowloon‐Canton Railway) runs from the CBD of Hong Kong to its sub‐urban area. Since August 1982, the trains have been powered by electricity instead of diesel. The modernization of the KCR has greatly improved its speed and capacity and has contributed to major improvement in public transportation between the urban and suburban areas. To assess the effects of this change, the price gradient of residential units between an urban and a sub‐urban station will be estimated from transaction records of properties in these two chosen locations on the railway line. Price influencing effects are controlled either by including them in the model, restricted sampling or other adjustment techniques. This method allows the net change in the price gradient before and after the improvement to be assessed. The results strongly suggest that improvement in public transportation have a negative effect on the price gradient along the railway line.