A Link between East and West: How the Guangzhou-Shenzhen-Hong Kong Express Rail Link Affects Property Prices in Hong Kong

Abstract

This study examines the impacts of the Guangzhou–Shenzhen–Hong Kong Express Rail Link on the residential property prices in West Kowloon, in which the terminus and only station of the Hong Kong section of the high-speed rail link is located. The express rail is characterised as being a link between Hong Kong and her motherland, China, which is a major source of buyers of property in Hong Kong. We investigate if there is an east-west connection premium introduced by the project by examining the spatial and temporal changes of property prices in the affected areas. Based on a sample of 282,131 transactions, this study uses the hedonic pricing and repeat sales models to examine whether property prices in West Kowloon have increased because of the development of the high-speed rail which signifies a link between Hong Kong and China and whether they have dropped because of the 2019 political movements which emphasize a decoupling. We find significant and consistent evidence to support these hypotheses from both the hedonic price and repeat sales models. The accessibility premium has been capitalised into property prices since the announcement of the project, and the size of the premium is the largest during the announcement period. However, the east-west connection premium is significantly offset by the recent events of political unrest, with properties that are located nearest the West Kowloon Station being the most affected. We derive policy implications regarding practical implications for the design and implementation of land value capture schemes and urban planning.

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