Capitalization Effects of Transport Infrastructure on Public Housing Prices during the Recession: Evidence from Hong Kong

Abstract

This study aims to examine the capitalization effects of transportation infrastructure on public housing prices during economic downturns through a case study of Hong Kong’s 2017–2019 recession. The transaction records of public housing before and after the recession are collected and comparatively analyzed. Transportation accessibility is measured in two ways: continuous variables (distance) and dummy variables (whether within a distance threshold or not). The hedonic pricing models are estimated using both ordinary least squares (OLS) for initial estimation and two spatial econometric models, that is, the spatial error model (SEM) and the spatial lag model (SLM), for addressing spatial dependencies. Results show that proximity to transportation infrastructure significantly increases public housing prices. (Public housing, unlike private housing, is typically designed for low-income homebuyers.) Metro stations, bus terminals, and high-speed rail stations are preferred, while airports have a negative impact on prices because of noise and remoteness. The positive capitalization effect of metro stations decreases during the recession, while the positive impact of bus terminuses increases. The percentage decline was greater for metro stations at 300–600 m than within 300 m. For metro stations within 300 m, OLS showed the largest drop (8.46%) and SEM the smallest (0.89%), with SLM close to OLS (7.66%). For metro stations between 300 and 500 m, the decrease was 28.42% (OLS), 20.96% (SEM), and 30.86% (SLM). These findings benefit public housing providers, housing policymakers, and transport planners in stabilizing the public housing market and maintaining the capitalization effects of transportation infrastructure.