How land-value windfalls could pay for the Doncaster railway

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The Herald Sun reports research by PRD Nationwide showing that on average, across all Melbourne suburbs, the presence of a railway station in a suburb adds about $48,000 to the value of the median “house” in the suburb. This average rises to $59,500 for the northern suburbs or $105,000 for the eastern suburbs.

Of course the increase in value is a locational advantage and is therefore attached to the land under the “house”, not to the building, because the value of the building is limited by construction costs, whereas the land has a locational value whether the building is present or not.

Technicalities aside, what does this say about the viability of the Doncaster railway?

To be conservative, let us classify Doncaster as a northern suburb (although it’s more like E/NE) and suppose that the uplift is $60k per “house”. Let us suppose that there will be 10 new railway stations, each of which will raise “house” prices within a 1km radius, within which there are 2 square km of “house” sites at a density of 15 per hectare, i.e. 1500 per square km. That gives 3000 houses per “suburb” served by a railway station. On these assumptions, the total uplift in “house” prices is

   10×3000×$60k = $1.8 billion.

The most recent estimate of the cost of the Doncaster railway is $840 million. If that sum were clawed back from the lucky property owners, they would still be a net $960 million better off, and the rest of us taxpayers would not need to contribute a cent.

2 Comments

  1. paul29-06-2013

    Given that government could pay it with an $ 840 mill loan at say 5% or 4200000 divide by 30,000 properties i think comes to $140 a year each property. Add what politics will allow to pay off capital. If it is not worth $3 a week to have a railway station within a km then dont build it. Nothing to do with general revenue or other taxpayers.

  2. paul29-06-2013

    Oops. Make that $1400 a year . And still very good value .

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