Impacts of transportation investment to property price in ha noi viet nam

By estimating the change of office rental price, this research aims to analyze the impacts of Hanoi metro line 2A to property price in Hanoi by hedonic method.. And large area, office bu

VIETNAM NATIONAL UNIVERSITY, HANOI

VIETNAM JAPAN UNIVERSITY

NGUYEN THI THU HA

IMPACTS OF TRANSPORTATION INVESTMENT TO PROPERTY PRICE IN

HANOI, VIETNAM

MASTER’S THESIS

Hanoi, 2019

HANOI NATIONAL UNIVERSITY

VIETNAM JAPAN UNIVERSITY

NGUYEN THI THU HA

IMPACTS OF TRANSPORTATION INVESTMENT TO PROPERTY PRICE IN

CONTENTS

ABSTRACT 5

ACKNOWLEDGEMENT 6

CHAPTER 1: INTRODUCTION 7

1.1 Introduction 7

1.2 Hypothesis and objective 11

1.3 Research framework 12

CHAPTER 2: LITERATURE REVIEW 13

2.1 Studies about property price and rent price by hedonic approach 13

2.2 Studies on land and property price in Vietnam 15

2.3 Effects of Hanoi MRT to office rental price 16

CHAPTER 3: METHODOLOGY 21

3.1 Data 21

3.2 Method 26

CHAPTER 4: GIS-BASED DATABASE DEVELOPMENT 30

4.1 Study area 30

4.2 GIS-based database 31

CHAPTER 5: DATA ANALYSIS 35

5.1 Data Characteristics 35

5.2 Estimation Results 42

CHAPTER 6: FINDING AND CONCLUSION 49

6.1 Finding and conclusion 49

REFERENCES 51

LIST OF FIGURES

Figure 1: Hanoi MRT Master Plan 2030, 2050 vision……….8

Figure 2: The benefit of using metro………9

Figure 3: Hanoi Metro Line 2A (Cat Linh – Ha Dong)……… 10

Figure 4: Two Cat Linh - Ha Dong trains leave the station in Hanoi during a trial run in September 2018……… 11

Figure 5: Samples in 11 urban districts in Hanoi by GIS……….21

Figure 6: Data samples……… 23

Figure 7: Type of building……… 24

Figure 8: Age of building……….24

Figure 9: Rent purpose……….24

Figure 10: Facilities of building……… 24

Figure 11: Population density of samples with buffer scale 500 meters………… 31

Figure 12: Employment density of samples with buffer scale 500 meters……… 31

Figure 13: Population density of samples with buffer scale 1000 meters…………32

Figure 14: Employment density of samples with buffer scale 1000 meters……….32

Figure 15: Number of samples inside MRT corridor in buffer 500 meter and 1000 meter……….33

Figure 16: Observed office rental price and estimated office rental prices……… 48

LIST OF TABLES

Table 1: Catalogue of variables………27 Table 2: Descriptive statics of variables in buffer 500 meters used in property price functions……… 37 Table 3: Descriptive statics of variables in buffer 1000 meters used in property price functions……… 38 Table 4: Correlations between potential explanatory variables with buffer scale 500 meters………40 Table 5: Correlations between potential explanatory variables with buffer scale

1000 meters……… 41

LIST OF ABBREVIATIONS

MRT Mass Transit Rapid

MRT 2A Hanoi Mass Transit Rapid Line 2A

BE Built Environment

TOD Transit Oriented Development

IRR Internal Rate Return

CBD Central Business District

GIS Geographic Information System

ABSTRACT

Viet Nam is a developing country which is similar to many developing countries are experiencing rapid growth Along with these developments, there are many existed problems such as traffic congestion, water pollution, air pollution, green-house gas emissions, energy…etc

Transportation in Vietnam is improving rapidly both quantity and quality Road traffic is growing fast but the major roads are dangerous and slow to travel on due

to outdated design and an inappropriate traffic mix Construction of expressways has accelerated Air travel is also important for long distance travel in Viet Nam Metro systems are under construction in the two metropolises of Vietnam, one in Hanoi and another in Ho Chi Minh City

Metro in Hanoi is a solution to solving traffic issues However, it still has some financial problems according from financial analysis of this project By estimating the change of office rental price, this research aims to analyze the impacts of Hanoi metro line 2A to property price in Hanoi by hedonic method

This study has found public transportation as bus frequency has positive significant impact to office rental price in Hanoi But Hanoi metro line 2A has negative significant impact at the moment There are several reasons Such as, Hanoi metro line 2A has not operated yet at the moment, the noise has bad influenced and reputation of project has not influenced to surrounded property Hanoi is the city which has high motorbike dependent, currently number of private car has been increased and bus system are the most choices to travel for people in Hanoi now And large area, office building, office in Old Quarter (Central Business District) and high employment density have positive impacts to office rental price in Hanoi city, Vietnam

ACKNOWLEDGEMENT

Firstly, I would like thank to my lecturers in Master of Infrastructure Engineering Program in Viet Nam Japan University for their inspiring in studying I have had meaningful studying time for two years with my master program

I would like to give my special thank and deep attitude to my supervisors, Professor Hironori Kato and Dr Phan Le Binh for their advices and support in research work I also would like to thank Ms Nguyen Thi Mai Chi for her guidance for my research

I would like thank all of my classmates for helping in studying This is my big support in my master program I have much helps from them during my master program

I sincerely thank to all members in Urban Planning Laboratory in Kanazawa University for one semester as exchange student I have learnt from many people from your acknowledge and their research work

Thanks for Viet Nam Japan University for all supports of my study for two years of

my master program I had learnt much academic knowledge and took part in many seminars which held by Viet Nam Japan University, also I had joined many school’s activities which were good memories with me My deep thank to my Japanese and Vietnamese lecturers in Viet Nam Japan University for all time in the school

Thanks for Kanazawa University for one semester-exchange program that I had done Thanks for my Japanese teacher and international students I had in this semester in Kanazawa University Finally, I would like to send my love and gratitude to my family who always love, support and encourage me every time

CHAPTER 1: INTRODUCTION

1.1 Introduction

In developing countries, transportation systems are directly affected to economic growth Because of affected infrastructure support for trading, it leads to developing the economy Railway is one kind of infrastructure which contributes to develop national economic, such kind of social benefit it brings to, many people will have better traveling

With many developed countries, for example like Japan, many company’s offices usually change the location near to metro stations according to its convenient when urban railway has been used It is the cause of the increase in office rental prices in the area around the metro line

But with a developing country like Vietnam which high motorbike dependent, people do not much rely on public transportation So the trend of change office location near to metro line in Hanoi will have a little different with a developed country like Japan But it still affect to the rental price along metro line corridor Urban infrastructure system Hanoi City is a whole and covers many areas of both economic infrastructure and social infrastructure Within the scope of the study public transportation, railway network in Hanoi brings to economic profit and social profit for citizens who are living in the city

In general, in recent years, the urban infrastructure system of Hanoi City has changed markedly, gradually changing the urban appearance towards synchronous, modern and increasingly important role in the city's socio-economic development However, the infrastructure system still has many weaknesses and shortcomings that do not meet the needs of the people, the socio-economic development requirements and requirements of a civilized and modern city with stature

Hanoi Urban Metro is a rail system has been developed in Hanoi, Vietnam This project is part of an integrated development program for urban transport in Hanoi

Figure 1: Hanoi MRT Master Plan 2030, 2050 vision (source: hanoimetro.net.vn)

Hanoi Metro System master plan consists 8 lines with 319 kilometers of total length with high capacity for carrying passengers for Hanoi city and contributes to Hanoi economic development

Commuters in Hanoi use motorbike, buses, taxis and bicycles Recently, private cars also have been raised in Hanoi because of enhanced living condition It is cause

of worse congestion and serious pollution in Hanoi Metro is part of Vietnam Ministry of Transport Master Plan, the project aims to meet the demand half of local people travelling number by public transport, minimize urban pollution, and enhance the people’s living conditions It will support to ease traffic congestion and reduce green-house effects

Hanoi metro will change urban transport in Hanoi which has approximately 8 million people are living in Opening of metro can be change the travel behavior of people who are living in Hanoi by the change of built environment

Metro Hanoi also will promote the growth of areas along the route and create thousands of direct jobs as well as many other jobs involved in the process of construction investment and operation exploitation

Figure 2: The benefit of using metro (source: hanoimetro.net.vn)

After the development of railway system, the office for lease demand in these areas increases, thus lead to the boost of the rental price It is an example shows the impact of Hanoi urban railway to the office rental price along MRT 2A corridor Therefore, this paper aims to analyze the impacts of Hanoi MRT 2A which is one line belong to Hanoi MRT system to office rental price in Hanoi, Viet Nam

Hanoi MRT 2A is the first operating line in Hanoi There are 12 stations from Cat Linh to Ha Dong and 13km of length The original cost estimate of $553 million but has been ballooned to more than $868 million, including $670 million in loans from China

According to plan, this line was already completed and can use in 2019 but in fact, this line still in trial It is an important project in Hanoi city currently

Figure 3: Hanoi Metro Line 2A (Cat Linh – Ha Dong) (source: hanoimetro.net.vn)

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1.2 Hypothesis and objective

Hypothesis

Assume that the Hanoi metro line 2A will be increase the price of office for rent along metro corridor

Objective

Estimate a property function with cross-sectional data by hedonic approach

Analyze Hanoi metro line 2A factor to property function

Contributions of this research

First, this research contributes to quantity several factors affect to office rental price in Hanoi city

Figure 4: Two Cat Linh - Ha Dong trains leave the station in Hanoi during a trial

run in September 2018 (photo by Vietnamnet)

Second, study also analyses the impacts of Hanoi metro line 2A to office rental price

 Chapter 4: GIS-based database development

 Chapter 5: Data analysis

 Chapter 6: Finding and conclusion

CHAPTER 2: LITERATURE REVIEW

2.1 Studies about property price and rent price by hedonic approach

Many studies research about factors affect to house price or land price in the world Public transportation affects strongly to property price When we considering factor affect to property price, several factors related

Public transportation investment increases property values (Cohen et al 2007) is a conclusion which prove the transportation effects to property

Olszewski (2019) study called hedonic analysis of office and retail rent and transaction prices in Poland – data sources, methodology and empirical results has been researched about rent price in Poland by hedonic approach

Follow Olszewski (2019):

The list of variables that describe the building includes such features as: sum of parking spaces, modernization, year of the modernization, total rentable area, common space, share of vacant space, number of storeys, average size of the rented premises, location in or outside of the Central Business District, share of retail space, office building class A, B and C, age of the building, dummy for the age of the building in the ranges of 5 to 10 years, from 10 to 15 and above 15 years They apply logarithms of the rent and all other continuous numerical variables, which allows them to capture the elasticity of rents relative to renting factors By hedonic method with the list of variables above this study has found a negative relationship between the size of the single premise on its rent, which can be interpreted as economy of scale A similar relationship can be found between house prices and their size

Fang (2018), Subway Opening, Traffic Accessibility, and Housing Prices: A Quantile Hedonic Analysis in Hangzhou, China found that:

The average housing price within 2 km of the station is 2.1% to 6.1% higher than

those outside We also find that the impacts of the subway differ significantly across the distribution of housing prices, wherein the absolute value of estimated coefficients increased from 0.023 for the 15th quantile to 0.086 for the 95th quantile The subway opening strengthens the capitalization effect of traffic accessibility The absolute value of price elasticity increases from 0.044 to 0.053, and the range of influence is expanded from 1500 m to 2000 m

Zhang (2016) studied about “Do Urban Rail Transit Facilities Affect Housing Prices? Evidence from China” determined the Urban Rail Transit facilities has critical role in citizen’s social activities and also markedly evaluate real estate price

in Chengdu, China

Zhang (2016) study found following:

Quantitatively, each 1% increase in rail transit mileage improves housing prices by 0.0233% Effects are smaller than those of some other variables such as per capita GDP, land price, real estate investment and population growth, which are recognized as fundamental determinants of housing price

Same case study in Chengdu in China, Gaolu Zou (2015) found that house price decreased with distance from Central Business District and walking distance to the nearest underground station that mean house had further distance from center and public transportation system was cheaper That means the house closer to central district and public transportation system was more expensive than the house further

By hedonic approach, this study analyzed 11 features affected to housing price in Chengdu and the results from analysis could suggest to government impose property tax better

As viewing study Kato (2018), “Impacts of urban rail investment on regional economies: Evidences from Tokyo using spatial difference-in-difference analysis”,

it has shown that the urban railway investment significantly positively influenced the land price in Tokyo The land price was positively influenced by the population and employment densities The railway introduction influences the land price

through anticipation of expected future development, but no indirect effect through the uplift of population density and employment density caused by the railway introduction

2.2 Studies on land and property price in Vietnam

In Vietnam, there are several studies about house price which relate to housing development Kato and Nguyen (2009) is one of the first researchers analyzing the determinants of housing values in Hanoi by hedonic price analysis with more than 1,500 samples collected from Hanoi Authority of Finance which covered 10 urban-districts in Hanoi

Recently, study was written by Mai Chi (2018) about potential impacts of Built Environment on travel behavior and property price in Hanoi shown that density, diversity and transit accessibility had positive effect on bus ridership and property price

This research aims to providing empirical evidences about the association of built environment (BE) with travel behavior in Hanoi and investigates empirically associations of BE variables with property prices in Hanoi, particularly highlighting the associations of density, diversity and transit accessibility with property prices Iida (2018), his study used Mai Chi research results and his data for analyzed the impacts of introducing Land Value Capturing for Mass Rapid Transit (MRTs) in Hanoi, Vietnam Iida’s research used case study in Hanoi metro line 2A

Iida (2018) found when population/employment density becomes 20-50% higher around MRT stations, capturing 2-5% of the total land price increment will bring the Internal Rate of Return (IRR) to positive By combining the office price function with a previously developed house price function, property prices after railway construction was estimated Railway revenue estimation was conducted by adopting a four step method to the origin-destination data A modal split model, a trip distribution model, and a trip generation and attraction model was developed in

order to estimate the railway demand under different built environment

There are several studies analyzing the house price in Hanoi but the studies about office rental price by itself stills scanty

2.3 Effects of Hanoi MRT to office rental price

Built Environment

Relationship between Built Environment (BE) and travel behavior (Mai Chi 2018)

The BE consisted of three characteristics, which called 3Ds of built environment, there are: Density, Diversity and Design in developed countries by Ewing and Cervero (2001)

Based on these three features of built environment, researches could be divided into four groups The first group’s studies focused on the impact of neighborhood design

to travel behavior The second group’s studies, which focused on the relationship between land use patterns and travel demand variables, were believed to isolate the main influence factor to travel behavior The third group, which looked closer to accessibility dimension of the BE, investigated the influence between transportation network and people travel behavior And the fourth group is studies which focused mostly on a smaller scale of urban design features than the above mentioned three groups

In recent years, many researchers focused more on the impact of some specific BE variables such as development density, land use mixture (diversity) But almost studies analyzed in developed countries

The first research focus in analyzing BE in developing countries Cervero et al (2009) studied about the influences of BE on walking and cycling in Bogotá, Colombia The BE variables are expressed 3Ds that plus two new additional Ds, which are Density, Diversity, Design, Distance to transit and Destination accessibility Unfortunately, this trend between Built Environment and travel behavior were not happen in Bogotá They found that street design was affected to

walking and cycling behavior

In urban railway, 5Ds of BE are considered: Density, Diversity, Design, Distance

to transit and Destination accessibility

Effects of Built Environment to property price

Effect of density on land price

Several studies have addressed the potential impact of density on housing prices A study concluded that increasing densities led to increased land value along Boston’s highway in US (Peterson 1974) but another study seen that high-density zoning associated with lower housing prices (Mullins 2001)

Study in UK found that rise of population density made high and rising levels of house prices (David Miles 2012)

Jonathan (2017) measured the residential density impacted to housing price in Singapore, this study had found increased in density causes non-trivial decreased in property values

Chang Doek Kang (2017), a study on condominium price in Seoul, the density had trivial impact on housing price

These results reflect that the effects of density on land price are inconsistent in different time and place

Effect of diversity on land price

Many researches were investigated the effect of diversity on land price The diversity was presented by land-use mix Mixed land use is defined as a mixture of commercial, residential and industrial land within a certain area (Koster et al 2012)

By presumed that mixing land uses yields socioeconomic benefits and therefore has

a positive effect on housing values, Koster et al (2012) demonstrated that a diverse neighborhood is positively valued by households There were various land use types

that have a positive impact on house prices, e.g., business services and leisure and there was substantial heterogeneity in willingness to pay for mixed land use

The previous study, Song and Knaap (2004) also investigated the effect of diversity

on house prices in Portland in the US, found that mixing certain types of land uses with residential led to the premium in property values

But in the contrast, Li and Brown (1980) focused on the negative externalities caused by the appearance of commercial land inside residential area They concluded that housings, located near commercial areas, had lower price caused by noise, visual pollution and congestion Malaitham (2013) showed that the appearance of residential, industrial and road in land-use attributes decreased the land values, while commercial, education, vacant land and side walk would lead to price premium, case study in Thailand

Effect of accessibility on land price

Central Business District (CBD) is the most typical characteristic in accessibility Gaolu Zou (2015) found that CBD had effected to housing price in Chengdu, China The house located closer, priced higher

Similarly, the shorter the distance to the CBD, the higher the land values (Bartholomew, K., 2011) Study had found the positive impacts of distance of CBD

on land price This trend has been seen in both developed and developing countries

Effect of distance to transit on land price

Commercial property prices increased when they located within a quarter mile of a station (Cervero and Duncan 2002) depended on type of transit And another study also concluded the shorter distance to station, the more valuable properties are (Malaitham 2013) Fang (2018) concluded that the average housing price within 2

km of the station was higher than those outside

But other study found that housings located too close to the railway tracks were

suffered to price reduction

These studies said the inconsistent results about the impacts of distance to transit to property price over time and location among different kind of transit technologies and its service

Studies on rent price

Eda (2003) concluded that locational characteristics explain the spatial rent variations of the office property in Ankara to a large extent There were 3 groups in this studies included physical characteristics, lease characteristics and location of building

The negative relationship between the size of the single premise on its rent in Poland (Olszewski 2019) Study focus on rent by two characteristics which were office characteristics (city size, location, building class, age, leasable area, parking spaces, time dummy) and retail characteristics (city size, location, retail type, age,

size of an average store, parking lots, time dummy)

Development around Hanoi MRT

The concept of Transit Oriented Development (TOD) is introducing for an

effective urban development in line Based on the “Hanoi Capital Construction Master Plan up to 2030 with vision 2050” the TOD plan was first introduced in

2011 The MRT is believed to restructuring the Central Business District (CBD), more competitive urban development along MRT corridor, connect urban areas and sub urban areas in Hanoi Improvements of access environments to MRT stations are the keys for a successful TOD introduction The field survey was conducted in

2018 has shown the development of both commercial and residential buildings could be seen along MRT construction areas (Iida 2018)

5Ds in Hanoi MRT

Density

Density characteristic is an important factor in BE analysis, population density and employment density are typical features

Population density is number of residents in the specific area Urban railway purpose to carrying passenger place to place in big city where has high population density

Hanoi MRT 2A line has been constructed from Cat Linh to Ha Dong run through high population density areas to lower population density areas

Employment density was affected by Hanoi MRT line Because of BE change, employment density inside change

Diversity

This characteristic belongs to land use mixed index According to development around Hanoi MRT, commercial and residential buildings surround MRT has developed It due to change the land use mixed

Destination accessibility

In Hanoi MRT, distance to Central Business District (CBD) which is Hanoi city center was recognized Guom Lake has counted as center which located in Hoan Kiem district and Old Quarter surrounded

CHAPTER 3: METHODOLOGY

3.1 Data

Dataset: location in Hanoi

Figure 5: Samples in 11 urban districts in Hanoi by GIS (created by writer)

Data collect about office rental price in Hanoi city From reputable Vietnam Real

Estate website batdongsan.com.vn and some other real estate website, I already

collected 578 samples from this source and some other website relate to office for lease in Hanoi

Office rental price was collected from eleven districts in Hanoi in 2019:

Information about collected from real estate news batdongsan.com.vn:

- Leasable area

- Floor for lease

- Kind of building

- Type of building

- Purpose for rent by the owner

Figure 6: Data samples (created by writer)

Several features of collected data (created by writer)

Figure 7: Type of building Figure 8: Age of building

Figure 9: Rent purpose Figure 10: Facilities of building

GIS data

The GIS data of Hanoi used was developed by Mai Chi (2018) Based on the DWG files created by the Hanoi Urban Planning Institute, she developed a GIS-based database All geographical analysis was conducted using ArcGIS

• 𝑋𝑛𝑃𝐷,𝑛: the population density in a buffering zone (R) for the individual n

• 𝑍𝑃𝐷𝑘: the average population density in a ward k

• 𝐴𝑘: the area in ward k

• 𝐴𝑛𝑅: the area of the buffering zone (R) for the individual n

• 𝑋𝑛𝑃𝐷,𝑛: the employment density in a buffering zone (R) for the individual n

• 𝑍𝑃𝐷𝑘: the average employment density in a ward k

• 𝐴𝑘: the area in ward k