The Effect of a Subway on House Prices: Evidence from Shanghai

Abstract

Within the context of a transition economy, this paper estimates how improved access to employment centers is capitalized into house price. We conduct an event study for the opening of subway Line 6 in Pudong district, Shanghai, China. The new line significantly reduces the commuting time to major employment centers. Other things being equal, easier commutes to the central business district (CBD) center result in an average house price appreciation of 3.75%, with the most distant residential zone enjoying the largest appreciation. When taking into account multiple employment centers, we find that the largest source of appreciation is from an improved access to a suburb center with poor initial accessibility and attractive job opportunities. Finally, the total appreciation caused by time savings to major employment centers decreases with neighborhood income level and increases with the distance from Line 6 stations.