27 April 2015
Dubai: The Metro Effect
The ‘metro effect’ is when an opening of a metro station leads to higher home values and rents within the vicinity. These phenomena have been widely researched, where the most popular outcome has been a positive correlation between the two variables. However, due to various reasons in certain cases (i.e. San Francisco) the metro has actually had an adverse effect on property prices.
The two communities that were the most measurable in freehold Dubai were JLT and Dubai Marina, due to the orientation and zoning of the stations. Both communities showed similar results. A price analysis was conducted pre/post the opening of the metro for buildings in close proximity to the station against the overall community index. Overall, there was no obvious price impact on buildings in the close proximity to metro stations in either community.
However, in both cases, an increase in transactional activity was witnessed during the time of the completion of the metro. We opine that this surge was originated by the speculators trying to capitalize on the ‘metro effect’.
In conclusion, whilst there is no discernible impact, this is likely due to the fact that not enough time has lapsed for this impact to have been felt (20 years) and individual micro factors are dominating the price index. However, as public transportation becomes more embedded in the fabric of domestic society (as indicated in a recent study conducted by the National), there will be a positive impact.
Download the full report: http://blog.reidin.com/PublicReports/unitas150428.pdf