How Important The Mighty MTR Is To Real Estate Values?We all have friends who live off the beaten path in the New Territories or on the islands with lovely, spacious apartments that are costing them ridiculous rents under $10,000 or something along those lines. Of course, the catch is that they’re off the beaten path: it’s 45 minutes to Central, they’re at the beck and call of a ferry schedule and arranging deliveries is an intricate process. But there are those 1,700 square feet to consider or a flat for under $4 million.

The difference between that sprawling flat and one in Kennedy Town — or Sheung Wan or Causeway Bay or Yau Ma Tei — is the MTR. In the case of Kennedy Town, it’s on the way. With much of the remainder of Hong Kong, it’s already there, and it makes life infinitely easier for residents and a great deal more lucrative for investors.

The Train Factor
Well documented but anecdotal evidence suggests being a few minutes away from Tokyo’s Yamanote Line increases both the capital and rental values of a property. Similarly, Berliners like to be near the S-Bahn or the U-Bahn, and Toronto’s intersecting subway lines put homes close to those at a premium. The Epping-Chatswood rail link in Sydney’s northern suburbs was the subject of a 2012 study by the University of Technology Sydney, which concluded, “Our findings show that dwelling prices were appreciated more before the commencement of construction and after the opening of rail service than they did after starting the construction and before the opening.”

Then there’s Crossrail. Knight Frank’s Action Stations research report called Crossrail the city’s most significant infrastructure project in two decades and noted, “An analysis of price movements of houses within a 10-minute walk of the major entrances to each central Crossrail station shows that values have risen by more than 30 percent since Crossrail was granted Royal Assent in 2008. Property values in these areas have not only outperformed average London prices, but also the price growth seen across all prime central London (PCL) areas. Indeed, the Crossrail Index outperformed the PCL Index by 8 percent between 2008 and 2012.” Not only will Crossrail (frequently noted in developers’ pitches to potential buyers) add value in existing areas of London, it is likely to stimulate regeneration, such as the activity already underway around the forthcoming Custom House station in Royal Docks and Woolwich station in Woolwich Arsenal. Knight Frank’s current market forecast is for central London prices to rise 31 percent by the end of 2018. “The forecast growth within [Crossrail station] walkzones will be over and above this.”

Fluid Value
On the heels of the Transport and Housing Bureau’s announcement to upgrade rail infrastructure by 2026 with seven new projects — a Northern Link, Kwu Tung Station, the Tuen Mun South Extension, the East Kowloon Line, the Tung Chung West Extension, Hung Shui Kiu Station, the South Island Line (West) and the North Island Line — how much more of Hong Kong is going to get pricey, or is it a downtown phenomenon?

Is property more valuable near transit links in tiny Hong Kong? For Colliers International’s head of research for Asia, Simon Lo, “Theoretically, it is a ‘Yes.’ But it is practically difficult to prove since property prices are affected by a number of different factors and the ease of transportation is just one of the many.” Prices in Sai Ying Pun and Kennedy Town spiked upwards of 20 percent in the wake of the west island line extension but have since settled down. In Wong Chuk Hang, prices would seem to have jumped more but they have yet to reach Central or Wanchai levels; Central commercial space far exceeds Wong Chuk Hang’s approximately $14,000 per square foot. The theory is that there’s already so much in key districts the value of a property is only marginally influenced by an MTR station.
“Hong Kong’s real estate market is quite efficient — current home prices have largely factored in the benefit of new MTR links. A further upside might be the future transformation of the [Sai Ying Pun and Kennedy Town] after the full completion of the new link. For example, will there be more facilities, such as new hotels and shopping malls to be finished in the coming years?” theorises Lo. That goes some of the way to explain the discrepancies from district to district.

But does an MTR station incentivise development? Crossrail would suggest transit infrastructure indeed boosts the growth of a district, but in the SAR it’s more difficult to determine which is the chicken and which is the egg. “Firstly, Hong Kong is one of the very few cities where railway system is running a significant profit. We can say the operation of MTR in Hong Kong has been heavily subsidised by real estate developments connected to the railway network,” notes Lo.

Does the spectre of a train station mean now is the time to consider property up near Lok Ma Chau or Sau Mau Ping? “It is always true that the completion of MTR link would create positive spill over to the adjacent developments,” finishes Lo. Maybe, maybe not. Either way investing in proposed MTR areas is a long-term play and whether it pays off is all conjecture. After all, there’s still no rail link to the Peak and it’s doing just fine.