Why Gold Coast light rail was worth it (it's about more than patronage)

Gold Coast’s light rail scheme has attracted great interest since the streets of Surfers Paradise were torn up and stations and track were built. Was it worth spending A$1.5 billion on 13km of light rail and more than $40 million a year in subsidies?

Are we right to be spending another $420 million on an extension to Helensvale in time for the Commonwealth Games? Should we be taking it all the way down to Gold Coast Airport?

Another question is whether gains in property values served by the project could be “captured” to fund such infrastructure.

Previous studies of property values in areas serviced by the light rail showed only modest gains after it opened. Our research cast a wider net back to when we first started planning the system in 1996 through to the latest data we could get in 2016.

The results were intriguing. We found that prices in the catchment areas started to increase in the earliest planning phases. The effects of the light rail were to push up property values within 800 metres of the stations by more than 30% in total from 1996 to 2016.

This is well above most previous estimates of a light rail system’s effects. This is mainly because we looked earlier for the property value gains and used a carefully designed control to make the comparison.

Impact after opening seemed modest

These findings cast a different light on the apparently modest impact of the light rail after it opened.

When the first stage from Broadbeach to our university at Parkwood opened it was well received. But the behaviour change we all hoped for was rather modest at first. After opening in 2014, patronage did not surge compared to bus ridership on the route in earlier years.

New passengers got on board, but it was an uphill climb for the new system. Fare increases of almost 50% from 2010 to 2014 pushed passengers off public transport across southeast Queensland, especially on rail.

Not all passengers enjoyed improved service for their particular journeys either. Those who used to travel through the corridor in a bus now had to break their journey at the light rail terminus and transfer, adding travel time and annoyance.

In the second year of operation, however, patronage jumped 16% and our contacts suggest third-year patronage is tracking well. Subsidies per passenger are falling. The decision to add the connection to Helensvale looks a sound one.

But, seemingly, other changes everyone expected weren’t there. The Bureau of Infrastructure, Transport and Regional Economics analysed property values in the corridor from 2000 to 2013 using a coarse geography and didn’t find much evidence of any uplift. This gave many cause for concern.

Reassuringly, Cameron Murray used valuation data for a similar period using a different geographical scale and found a 10% increase for properties within 400 metres of the new stations. But there was still uncertainty.

Our new research backs up and expands on Murray’s findings, suggesting there was substantial positive impact.

What did our research look at?

Our research team in the Funding on the Line Australian Research Council Linkage Project took a different approach.

In a peer-reviewed paper, which will shortly be presented at the World Symposium on Transport and Land Use Research, led by Barbara Yen, we used sales data for residential properties along the corridor. Our study compared areas within 800 metres of the stations with a control area containing locations a little further away but still in the same vicinity.

We used a longitudinal methodology to see when the value uplift occurred from back in 1996, when planning of the system first started, through to the latest 2016 data. Property prices in the catchment areas started to increase very early in the planning phase. The property value uplift was highest in the locations between 100 and 400 metres from the stations.

Values went up 11.9% in these locations compared to our control areas between 1996 and the feasibility study’s announcement in 2002. They increased a further 26.3% from 2002 to 2006 over the control areas when the feasibility study was completed. Prices rose only 2.3% from 2006 to 2011 when the formal funding commitment was made and construction began, and then by another 5.4% after the line opened to the end of the study period in 2016.

The areas less than 100 metres from the stations, and between 400 and 800 metres also recorded strong increases compared to the control areas, though not quite as much.

This is to be expected. Sites closest to the stations received some nuisance from the light rail and road corridor; sites further away obtain fewer advantages in travel time savings for passengers.

What are the funding implications?

The property value gains attributable to the project from 1996 to 2016 of more than 30% are very significant. Yet it’s pretty much only the landowners who benefit.

The City of Gold Coast recoups some of its $120 million investment in the light rail through its rates and its public transport levy on urban residents. The Queensland government may end up getting a little slice via stamp duty as properties are sold. The few pieces of government-owned land likely rose in value.

But the state and federal governments generally have no other mechanisms to take a small sliver of the increased property value their investment generated to help pay for the light rail system or reinvest in public transport elsewhere. We’ve written about this previously in The Conversation and suggested ways we could change the system.

A recent federal parliamentary inquiry and moves to set up “value sharing” units in the Queensland and New South Wales governments suggest we are now getting serious about generating alternative funding for public transport.

Our study’s results only add more support to these initiatives. Get it right and we should be able to deliver more metros, busways and light rail to serve our growing population and its increasingly urban way of life.