Last week, Hamiltonians found out they were going to be the beneficiaries of up to a $1 billion (yes, billion with a “B”) transit investment from the provincial government.
Naturally, the announcement has been both cheered and jeered. Proponents welcomed the news trumpeting the long-term economic and environmental benefits for the city. Opponents felt the short-term pain of construction and traffic disruption outweighed the long-term gains, and that the money would be better spent elsewhere. This is normal for a major, multi-year, transformative announcement and its part of living in a democratic society.
As we at Hamiltonize are inclined to do, let’s take a look at what this could mean for property values.
First off, what’s being proposed? A Light Rail Transit line running along King St. from McMaster University in the west to the Queenston traffic circle in the east. This will also include a spur line to the new James St. North GO station which is currently being built. Procurement will start in 2017 and LRT construction will get underway by 2019.
To help with this discussion, we can look to a 2014 report by the Real Estate Investment Network in Canada on how proposed transit improvements can affect real estate values for properties close to the new developments. Unique studies were done for a number of Canadian jurisdictions, Hamilton being one.
Here are a few highlights:
- Hamilton transit improvements will deliver an enhancement of real estate values in the areas most affected by 10-20%. The areas are generally understood to be those within a kilometre of new or proposed stations or access points.
- Transit studies (which informed this report) show that the properties within 500-800 metres of the new or proposed stations will see increases, however, properties in the immediate vicinity of the new stations experienced some negative effects, such as increased traffic, nuisance, property crime and noise.
- Values in key neighbourhoods will increase more quickly than other neighbourhoods further away from the transit stations. Properties with increased access to transit will have a similar effect as properties built in close proximity to highways and major road networks.
- Values in older and more established neighbourhoods are impacted more significantly than newer developments.
Aside from this, a couple other things stand out which may be worthy of noting.
First, the report states that the biggest winners from transit development are renters. Reason being is that renting a unit close to transit can save renters up to $1,200 per year as it allows renters to forgo commuting by car. Additionally, while the value of the property in which the renter is living may increase, rents have not increased proportionately to the savings realized from having the access to transit. Basically, renters save commuting costs and do not generally pay that difference in rent.
Another important thing to note is that while residential properties see the greatest increases between 500 and 800 metres from new transit stations, commercial properties in the immediate vicinity benefit immensely. This is due to the increased movement of people creating greater opportunities for retail activities. That said, the research shows that the retail properties must be directly adjacent to the stations in order to reap the biggest rewards.
Putting this announcement in the context of the report’s findings, the scale is remarkable. Consider this: the proposed main LRT line will travel across the lower city with the north-south offshoot. That’s 11 kms, three MLS zones, a handful of municipal wards, dozens of neighbourhoods and upwards of a few hundred thousand residents. That is a lot of change for a lot of people in a lot of places with plenty of potential opportunity in between. Unfortunately no real estate agent has a crystal ball to predict values and potential winning neighbourhoods, but it’s safe to say that this will shake up the real estate scene in the city for decades to come.
So, where does this leave us? Pretty much about the same place we started. Unfortunately we’re still in the very early days of this development and no one can firmly predict what the final product will be or even exactly where the stations. This report is a very good read and it’s helpful in understanding activity and property appreciation behaviours in other jurisdictions. But I would definitely hazard against using this report solely to inform an investment, which requires due diligence and analysis.
What we can take away from all of this is a renewed sense of optimism for our city, our citizens and our economy. To be recognized with this type of transformative investment surely proves that people outside of Hamilton understand the city’s rebirth as a great place to live, work and play, and are placing some big bets about our future.