Modeling the Impacts of Izmir Subway on the Values of Residential Property Using Hedonic Price Model

Abstract

The thesis analyses the effects of subway investment on the value of residential properties in the case of İzmir subway. It has been known that there is a strong relationship between investments in transport infrastructure and real estate values. There have been many empirical studies associated with the objective of the thesis in urban planning practice, in the world. The empirical studies provide information about economic returns, benefits and costs of proposed investments for policy makers and practitioners. However, there has been little empirical research in Turkey. Therefore, the study attempts to investigate a relationship between property values and changes in accessibility caused by transportation infrastructure investment.In order to achieve the objective of the thesis, an extensive research methodology has been developed. First, many empirical studies are reviewed. The literature survey provided information about the models, variables and functional forms. Hedonic price model is one of the most favored techniques for analyzing urban rent determination in general and the impacts of transport investment on property values in particular.Within the context of the thesis, hedonic price model has been applied to analyze the effects of subway investment on property values in İzmir. In the modeling process, Eviews and SPSS econometric . statistical softwares were used. In addition, Geographical Information Systems (GIS) in hedonic modeling of property values was used for measuring spatial-related variables and for creating buffer zones. For this reason, MapInfo software was used. In the models, four different functional forms were used for the case study. The results of the models were analyzed under the assumptions of the regression models.In conclusion, the models give a high level of explanatory power on price variations. The results indicate that proximity to the subway stations is a statistically significant determinant of the market price of house units. It means that direct savings from transportation improvements have been capitalized into property values due to improved accessibility. In addition, it is observed that the influence of transport investment on property values depends on transport costs, total vehicle time and distance to the nearest station. The effects associated with accessibility have been measured using distance and travel times as proxies. The effects are high in the impact zone of the subway stations, but it is small for greater distance from the buffer zones of the subway stations. Log linear and linear log forms are statistically superior to other functional forms.