21st Asean Valuers Association Congress – Yogyakarta, Indonesia – 26 December 2018
Prepared by: HARIZUL AKBAR NAZWAR, B.Eng., M.Ec.Dev., MAPPI (Cert.)
(Certified Property Valuer & Real Estate Analyst at Amin, Nirwan, Alfiantori & Partners Valuation Firm)
Jakarta’s massive economic growth has caused many people to urbanizing with economic motives, either investment or job seeking, resulted massive urbanization and urban agglomeration. Greater Jakarta (Jabodetabek) as a business center and state’s capital has experienced a population growth of 1.3 times over the period 2000 – 2010 with an average population growth of 2.8% per year which has a total population of 31 million people. This trend led to some serious problems, which are housing backlog, urban sprawl, and traffic congestion.
Recently, Jakarta has undertaken the construction of mass transportation infrastructure such as Commuter Line, Mass Rapid Transit and Light Rapid Transit. In the context of public transportation development, the idea has emerged to adopt the concept of Transit Oriented Development (TOD). TOD is a concept of developing mixed-use areas that oriented to the effectiveness and efficiency of people mobility with public transport facilities as well as improving the quality of people life.
Therefore, by understanding the theory and best practice about TOD, the stakeholders, government, SOE, private developers, and of course property valuers would have better understanding about TOD impact on real estate market and property value in the near future, in particular for developing countries that will implementing TOD based planning and development.
Keywords: transit oriented development, property, real estate, market, valuer, appraisal
According to United Nations (2017), world population growth is expected to touch 8.6 billion by 2030, which 94% of the figure contributed by developing countries such as Indonesia. Meanwhile, Greater Jakarta (Jabodetabek) as a business center and state’s capital has experienced a population growth of 1.3 times over the period 2000 – 2010 with an average population growth of 2.8% per year which has a total population of 31 million people (Statistics Indonesia, 2010).
Figure 1. Population in Greater Jakarta 1970 – 2010
Source: Statistics Indonesia, 2010
Jakarta’s economic growth is always higher than national economic growth. Currently, Jakarta’s economic growth touches 6.02% (Q1 2018) while Indonesia’s is only 5.06% (Q1 2018). This happened because most of the investment is based in Jakarta and the surrounding area.
The impact of Jakarta’s massive economic growth has caused many people to urbanizing with economic motives, either investment or job seeking. This resulted massive urban agglomeration in Jakarta and let to the creation of metropolitan area in which Jakarta is surrounded by several sub-cities including Bogor City, Bogor Regency, Depok, Tangerang City, South Tangerang, Tangerang Regency, Bekasi City, and Bekasi Regency. Total area of DKI is only 9% of its metropolitan area, but the build-up area ratio is about ±20% (ESCAP, 2017).
Housing Problem and Urban Sprawl
With the high population in Greater Jakarta, housing needs will also be higher. Jabodetabek has a total population of ±31 million people with population density of 4,383 people/km2, while the total population of Jakarta is only ±11 million but the population density is about 14.469 people/km2.
Housing backlog in Indonesia is considerably high. According to Ministry of Public Works and Public Housing (2018), until 2015 housing backlog in Indonesia reached 11.4 million housing units. This figure shows that there are 11.4 million families who do not have permanent houses. Not only that, based on data from World Bank (2016), there is an increase for housing needs of around 820,000 to 920,000 units each year that caused by population growth and urbanization. The private sector only produces approximately 400.000 units per year and an additional 150,000 to 200,000 units are delivered by the public sector. This leaves a gap of 220,000 to 370,000 householDrds that must resort to self-initiated solutions or overcrowding in existing units each year. Sadly, as a business center and national capital, DKI Jakarta is the province that has the lowest home ownership which is only 51.09%.
The World Bank estimates around 828 million people in developing countries will live in slums and uninhabitable houses. This indicates that there are still many people who do not have the ability to have a decent and affordable house. Based on data by the Global Property Guide (2018), house price to income ratio in Indonesia reached a very high number of 78x. This figure means that the house price per meter in Indonesia is about 78 times than income per capita. This is far different from Singapore, which has a price to income ratio of 25x and Malaysia amounted to 36x. This data proves that the housing purchasing power in Indonesia is still very low.
Figure 2. Land Use Development in Jabodetabek, 1972 – 2010
Source: Ministry of Public Work, 2012
Based on figure above, it is seen that the built-up areas in Greater Jakarta continue to increase year by year. Greater Jakarta agglomeration has now led to a wider area including Cibubur, Cikarang and Cianjur. Most build-up areas formed as residential areas. One of the reasons people choose to live in a buffer area or sub-urban is the affordability factor. However, Smith in Budihardjo (1987) states that in developing countries there is a strong relationship between income levels and priorities in choosing a home. High-income people have priorities related to social facilities, ownership status and the last is the distance to workplaces. But on the contrary, low-income people have the opposite priorities, they prioritize distance to workplaces, ownership status, and the last is social facilities.
Figure 3. Concentric Zone Model, Sector Model, and Multiple Nuclei Model
Source: Burgess (1925), Hoyt (1939) and Harris & Ulaman (1954)
This is consistent with the concept offered by Burgess (1925) with Concentric Zone Model, Hoyt (1939) with Sectors Model and Harris & Ullman (1945) with Multiple Nuclei Models. They argue that low-income people should live closer to the central business district due to mobility effectivity and transport cost efficiency. With this model, it is expected that low-income people can reduce transportation cost, travel time, and travel distance to workplace.
The development of residential areas in Greater Jakarta shows opposite trend. Low-income people mostly live in Jakarta buffer zone. This phenomenon happens due to the limited purchasing power of low-income people. The impact of this situation is a significant increase in transportation cost, travel time, and travel distance.
Unbalanced development can lead to the emergence of urban sprawl. This occurs because of the unbalanced between housing purchasing power against housing price. If not controlled, the higher housing price, the more possible urban sprawl will formed. According to Ewing, Pendall, and Chen (2003) urban sprawl defines as low density development beyond the edge of service and employment, which separates where people live from where they shop, work, recreate and educate.
Land Use Conversion
High population growth and rapid development led to high conversion in land use patterns in Greater Jakarta. Paddy fields and productive lands experiencing a rapid change into developed area.
Urban population growth is not linearly proportional to land availability. This led the tendency of people to buy houses outside Jakarta. There are several things that becomes the main trigger for the people to buy houses outside Jakarta, first is a relatively lower price, and second is a more alternative choice.
Figure 4. Land Use in Jakarta (2001: left; 2009: right)
Source: Nagasawa, et.al (2015)
Data shows that there has been an increase in Greater Jakarta’s land use by 10% for residential area during 1992 to 2001. And at the same time period, there has been a decrease of conservation areas by 16 %. At least, referring to Greater Jakarta’s Land Use Planning, the overall land use conversion in Greater Jakarta is about 20%. The expansion of Jakarta’s urban areas has been significantly influenced by the opening of toll roads from Jakarta to the surrounding area and by economic policies that supported industrial expansion and foreign investment since the end of 1980.
The build-up areas in Jakarta increased from 560 km2 to 594 km2 during 2000 – 2010 with a growth rate of developed area of 0.6 % per year. This growth dominated by the development of shopping centers, offices, and apartments. However, built-up areas in Greater Jakarta increased very sharply from 544.2 km2 to 849. 7 km2 during 2000 – 2010 with an average growth of 4.6 % per year. This growth is including the development of several new cities and industrial estates. There are at least 27 new large-scale cities developed in Greater Jakarta until 2010, with covering area ranging from 500 to 8000 hectares (Hudalah & Firman, 2011)
Figure 5. New Town Development in Jakarta Greater Area Until 2010
Source: Herlambang in RITJ, 2015
Based on my observations, those new town did not transfer socio-economic activities from Jakarta to the surrounding area because basically, the developers did not provide new employment and fundamental economic activity for their residents. Therefore, most of the people who live in Jakarta buffer zone are those who work in Jakarta. As a result, those new towns only function as dormitory towns that fully socio-economically dependent on Jakarta, which significantly increases the burden of daily mobility between those new towns and Jakarta as the center of economy.
Greater Jakarta areas growth rapidly in all sectors. In 1990, Greater Jakarta population is only 17 million people and increased to 31 million in 2010. This means that Greater Jakarta experienced population growth by 1.6 times in the last 20 years with an average growth of 2.5% per year. As for economic growth, Greater Jakarta economy contributes 25% of the national GDP with a population of only 11.8% of Indonesia population. Greater Jakarta is the biggest economic growth, where 40% of foreign investment is concentrated here.
With the increasing number of population triggered by high urbanization, urban mobility has become increasingly high. The number of vehicles in Asia has doubled in the span of 5 – 7 years. Jakarta, Bangkok, and Seoul are some cities with the highest motorization growth rates in Asia. Vehicle growth in Jakarta reaches 6,000 units per day, with a car growth of 1,500 units and motorbike of 4,500 units (Jakarta Police Department, 2015). According to Statistics Indonesia, until 2014 the total number of vehicles in Jakarta was 13,084,372 units for two-wheeled vehicles and 3,226,009 units for four-wheeled vehicles. Meanwhile, road growth rates in Jakarta is only 0.01% per year. The data above shows that there is a very significant growth imbalance between road growth and vehicle growth. Therefore, the development of new roads in urban areas cannot be expected as an effective solution to reduce traffic congestion, and even leads to stimulate private vehicles ownership. This was reinforced by the lessons learned from other cities in Asia such as Bangkok, Taipei and Hong Kong which proved that to reduce traffic congestion, the most effective way was to improve the transportation system and build mass transportation infrastructure, not by adding new roads.
Figure 6. Daily Travel Pattern by All Modes of Travel – Trips (‘000)
Source: Japtrapis, 2012
The growth of private vehicles in urban areas has increased, while public transport modal shares tends to decrease. In 2002, the use of public transport reached 55% and experienced a significant decline until 2010 to 28%. This is compounded by the increasing number of urbanization, which also followed by the use of private vehicles. Daily traffic in Jabodetabek in 2003 amounted to 37.3 million/day, whereas in 2010 this number jumped to 59 million/day. A poor public transport system, lack of facilities that provide passenger comfort and safety, and uncertainty waiting time became a trigger factors for the public to use private vehicles.
Understanding Jakarta congestion will be easier by knowing road-to-vehicle ratio. In Jakarta, road-to-vehicle ratio is 2,077 vehicles/kilometer. Meanwhile, road-to-area ratio in Jakarta is only 5.42%, in which Jakarta total area is 740 kilometers square while the total road length is 7,650 kilometers. This figure is relatively small compared to major cities in the world that ideally have a road-to-area ratio of 15%. This resulted Jakarta experiencing 58% of extra travel time or losing about 48 minutes every day for travel time (TomTom Traffic Index, 2016). Within a year, at least time lost for travel activity is 184 hours. Bappenas (2017) noted that the economic losses caused by congestion in Jakarta amounted to 67.5 trillion rupiah or US $ 4.73 billion which included health losses, environmental losses, social losses, and of course time losses.
Figure 7. Morning Peak Time and Travel Speed 1985 – 2011
Source: Japtrapis, 2012
TOD as Comprehensive Solution
The various problems described above must be resolved. Until now, Central Government as well as DKI Jakarta Government have carried out several policies to unravel congestion in the capital city. Some ideas for alleviating congestion have been emerged for the past few decades. Since 1980, at least 25 studies have been conducted to test the feasibility of Mass Rapid Transit (MRT) in Jakarta. However, the MRT construction only began in 2013 and the first phase of construction is expected to be completed in 2019.
Long before the construction of MRT has started, Jakarta had implemented the Bus Rapid Transit (BRT) system under the name Transjakarta. Transjakarta has been around since 2004 and it is one of the first BRT in Southeast Asia. Until now, Transjakarta have 242 BRT stations spread over 13 corridors (lines) with a total of 113 routes. Transjakarta recorded the highest passenger record per day in 2017 at 502,389 passengers. Throughout 2017, Transjakarta has transported as many as 144.86 million passengers.
Not only that, Jakarta has also improved the commuter train-based transportation network that serve the needs of people’s mobility almost all over Jakarta Greater areas. Until now, Greater Jakarta Commuter Line (KRL) have 6 lines and 13 relations serving 80 stations throughout Jakarta, Bogor, Depok, Tangerang, Bekasi, Banten and Cikarang with total route length of 418.5 km. Greater Jakarta Commuter Line passengers increase significantly from year to year. In 2012, passengers recorded only 366,358 per day, while in 2015 it rose significantly to 705,556. Supported by 18 rolling stocks, throughout 2017 the commuter line recorded passenger number of 315.8 million people with an average passenger per day of 953,932. Although various mass transportation facilities are available, the use of private vehicles in Greater Jakarta is still very high. This become an indication that at this time, public transportation services have not been able to meet the transportation needs of the people.
A series of policies to improve public transportation that stated above, will be difficult to be effective if not followed by improvement in housing sector and land use. With the rapid increasing number of housing needs, the urban agglomeration is also widening. If the agglomeration continues to widen, then the travel distance, travel time, and travel cost to workplaces that mostly located in Jakarta will continue to increase. As a consequences, people mobility will be higher and makes the congestion worse. If this pattern not controlled, then transportation and housing needs will never balance with its supply. Therefore, a comprehensive policy is urgently needed to solve urban problems: housing, land use, and transportation in an integrated act.
In the context of public transportation development, the idea has emerged to adopt the concept of Transit Oriented Development (TOD). TOD is a concept of developing mixed-use areas that oriented to the effectiveness and efficiency of people mobility with public transport facilities as well as improving the quality of people life. Besides transit oriented which is close to transportation nodes, the characteristics of TOD area are high density, multi-activity (mixed-use), and environmentally friendly. TOD was first introduced by an American urban designer Peter Calhtorpe in the 1980s. Calthorpe officially published TOD as an urban planning concept in 1993 under The New American Metropolis project.
The TOD-based planning concept emphasizes the integration function between mixed-use and transportation system so it will create an area that environmentally friendly, high density, and integrated. By promoting integration, people’s mobility can be reduced significantly. If mobility decreases, transportation problems such like traffic congestion can also be minimized. TOD implementation will also save travel time and transportation cost due to transition of transportation modes from private to public transportation.
Calthorpe (1993) explains that TOD is a mixed-use area with an average distance of 2,000 foot walking distance of a transit stop and core commercial area. TOD offers high density area, complete with social facilities and commercial facilities, both retails and services. The goal is to combine people mobility at one point to reduce people movement using private vehicle. In another view, Smith and Brooks (2012) stated that TOD is a terminology used to explain the integration of transportation and land use and the improved social, economic, health, and environmental outcomes that can result by locating housing, jobs, and other activities near quality transit.
Calhtrope (1993) emphasizes that in planning TOD area, there are principles that must be met. These principles are:
- Core Commercial Areas
Commercial function is an important part of TOD. With that, people is given an easy access from their transit stop to commercial area. At the very least, the core area should provide convenience retail and local-serving offices. The core area should have a public green or plaza to serve as a community focal point and activity center. The core commercial area must represent at least 10% of the total TOD.
- Residential Area
TOD residential areas include housing that is within convenient walking distance from the core commercial areas and transit stops. Density requirements should be met with a mix of housing types, including small single-family lots, townhomes, condos, and apartments. For distance travel, at least residential area must located in radius 2.000 feet and can be reached within 10 minutes by walking or cycling from transit stops.
- Park, Plaza, and Civic Buildings
Public and social facilities such as parks and plazas must be available within TOD area. This is important in order to meet people’s social needs that lived in TOD area. Hospitals, schools and libraries should be placed at focal points around transit stops. Not only providing easy access, placing parks and social facilities near to transit points can be a particular landmark in a TOD area.
- Streets and Circulation System
The road system in TOD area must be oriented to pedestrians. Width of the road, maximum speed limit, and number of lanes must be reduced, while bicycle path and sidewalk greening must be maximized. The road system must be arranged in a grid system to minimize deadlock and maximize connectivity.
- Pedestrian and Bicycle System
Pedestrian and bicycle routes should be located along or be visible from all streets. They must provide clear, safe, and comfortable access to the core area and transit stop. Comfortable, convenient and safe pedestrian and bicycle routes are vital to reducing automobile trips.
- Transit System
A transit system can help define the density, location, and quality of growth within a region. Therefore, transit lines must be located to provide the maximum amount of area for TODs to develop and grow. Transit stops should be centrally located and adjacent to the core commercial area. Transit stations must prioritize comfort, security and convenience for people. Parking lots should located far from transit station, and it should never isolate pedestrian from access to the transit station.
- Parking Requirements and Configuration
In order to reduce dependence on automobile, the empowerment of pedestrians and bicycle users must be maximized. There for, TOD area should minimize the availability of parking facilities, especially in residential areas. For commercial areas, parking facilities may be provided but with a limited number. Joint parking or shared parking would be better rather than single parking, particularly within commercial area.
Figure 8. TOD Scheme
Source: Calthorpe, 1993
In addition, the Institute for Transportation and Development Policy (ITDP) issued a special standard for the development of TOD. TOD standards according to ITDP (2013) are as follows:
- Walk, develop neighborhoods that promote walking
- Cycle, prioritize non-motorized transport networks
- Connect, create dense networks of streets and paths
- Transit, locate development near high quality public transport
- Mix, plan for mixed use
- Densify, optimize density and transit capacity
- Compact, create regions with short commutes
- Shift, increase mobility by regulating parking and road use
Figure 9. TOD Standard Illustration
Source: ITDP, 2013
Based on its scale, TOD is divided into two scales, regional (inter-urban) TOD and neighborhood (local) TOD. On a regional scale, TOD focuses to connecting transit station connected to core station between one region and another. Whereas on a neighborhood scale, TOD focused on increasing density of the area as well as integrating the function of the area around connecting station.
TOD Best Practices
The industrial revolution has a huge impact of the growth of automobiles worldwide. This also causes global problems, in particular traffic congestion that mostly experienced by major cities in developed countries, especially in United States. As traffic congestion worsens, there are Bay Area Rapid Transit (BART) in San Francisco, Metropolitan Atlanta Rapid Transit Authority (MARTA) in Atlanta, and Washington Metropolitan Area Transit Authority (WMATA) in Washington DC as an institution specifically assigned to overcome congestion problems in such cities.
Since its introduction by Calthorpe in 1993 with its first project in Atlanta, USA, urban planning based on TOD continues to be applied in other cities around the world. Curitiba and Bogota, Singapore, Paris, Hong Kong, Melbourne, even Bangkok have adopted and implemented the TOD concept. In this context, I chose to review TOD developments in Hong Kong because it has the characteristics that similar with Jakarta.
Hong Kong is a business center with an area of only 1,100 km2 and 40% of its area is conservation forest where nothing development can be carried out in the area. Based on 2012 population census, Hong Kong has a population of 7,409,000 people.
Due to its worsening traffic problems, Hong Kong began the construction of a railroad-based transportation system under the name Mass Transit Railway (MTR) and began operated in 1970s. The total length of MTR in Hong Kong is 218 km with a daily passengers of 4,815,000 (as of April, 2018). Hong Kong MTR has at least 48.1% market share of total public transportation. Since MTR developed, the congestion problem in Hong Kong was significantly reduced, linear with an increase of MTR users.
With the high number of MTR passengers in Hong Kong, the government carries out urban renewal with TOD concept that integrates between MTR stations and residential as well as business areas. The MTR development in Hong Kong carried out by MTRC (Mass Transit Railway Corporation) with three business cores: railway transportation, property development and investment as well as property management.
The area around transit station is became new mixed-use centers that will stimulate an increase MTR users. Study from Tang, Chiang, Baldwin, & Young (2004) revealed that the closer residential area to the MTR station, the higher population using MTR, and vice versa.
Figure 10. Tsing Yi Station Development Master Plan
Source: Study of the Integrated Rail-Property Development Model in Hong Kong, (Tang, Chiang, Baldwin, & Yeung, 2004)
Not only success in migrating the use of transportation modes from private to public, the implementation of TOD in Hong Kong also contributed to economic factors. With the rapid development of property in almost all TOD stations in Hong Kong, MTRC as the MTR and property management company recorded a net return of USD 2.33 billion from period 1980-2005 (Cervero & Mukarami, 2008). From 2000 to 2012, 38% of MTRC profits were obtained from property development, 28% from commercial property rental income, and 34% from MTR operations (Suzuki, Murakami, Hong, & Tamayose, 2015). In conclusion, the existence of Hong Kong MTR has provided advantages for Hong Kong’s urban planning to become compact urban form, high density and transport efficient.
TOD Development in Greater Jakarta
Greater Jakarta begun the development of TOD since 2017 with the issuance of Governor Regulation No. 44 of 2017 of Transit Oriented Development which effective on April 7, 2017. It regulates the basic principles and technical criteria of TOD. But specifically, it has not regulated the TOD location outside Jakarta. Shortly after the governor’s regulation issued, the Ministry of Agrarian and Spatial Planning issues Ministerial Regulation No. 16 of 2017 of Guidelines of Transit Oriented Development which effective on September 27, 2017. This regulation has been issued considering the TOD development is inter-regional, so it would be difficult to apply if the law itself only have legal force at governor level. Substantially, Ministerial Regulation No. 16 of 2017 regulates the basic principles of TOD, criteria for determining the TOD location, and TOD formal institution. The last legal hierarchy related TOD development is Presidential Regulation No. 55 of 2018 of Transportation Master Plan of Jakarta, Bogor, Depok, Tangerang and Bekasi 2018 – 2029. The Transportation Master Plan needs to be prepared as a response to regulate the integration of mass transportation infrastructure development in Greater Jakarta such as Mass Rapid Transit, Light Rapid Transit, and Bus Rapid transit. In this presidential regulation specifically the TOD scale is divided into three, Urban TOD, Sub-Urban TOD, and neighborhood TOD.
Figure 11. TOD Planning Locations in Greater Jakarta
Source: Presidential Regulation No. 55 of 2018
In Jakarta, TOD development is at several points following the MRT routes. Referring to DKI Jakarta Governor Regulation No. 14 of 2017, the first phase of TOD construction covers Lebak Bulus, Blok M, Senayan, Istora, Bendungan Hilir, Setiabudi, Dukuh Atas and Bundaran HI. As for Bodetabek the TOD development is in several locations, including Depok City, Bekasi City, Bekasi Regency, Bogor City, Tangerang City, Tangerang Regency, and South Tangerang City. There are at least 23 TOD points planning to build within 2019 – 2029. Until now, there are at least seven TOD points that have been started (some are only ceremonies), including Tanjung Barat, Pondok Cina, Pasar Senan, Juanda, Tanah Abang, Bogor, dan Lebak Bulus. The TOD area will provide residential, commercial functions as retail and office, shpping centers and hotels.
Figure 12. Lebak Bulus TOD Planning
Source: Ministry of Transportation Republic Indonesia, 2015
Measuring TOD Impact on Property Value
In principle, values are influenced by four main factors, social, economic, government policies and environment (The Appraisal of Real Estate, 2013). Fanning (2005) added that to understand the effect of location on value, both macro and micro analysis is needed. However, because TOD development in Indonesia has just begun, it would be impossible to empirically analyze the impact of TOD on property value. Therefore, I take a few study cases in other countries that already adopted TOD, so it can provide an overview of TOD impact on property values in Indonesia, particularly in Greater Jakarta.
In simply explanation, the impact of location on value is considered as a trade-off between transportation cost, travel distance, and specific feature offered from a location. In the land economics perspective, accessibility is considered as a concept that underlies the positive relationship between transportation and land use. When accessibility become better, goods and services movement will be more efficient, so it will makes travel cost less and travel time faster. The development of a mass transportation such as MRT and LRT will improves accessibility to the land within its service corridor relative to other areas and hence increases its locational advantage. Economic location theories suggest that, when other factors remain the same, social and economic activities will shift towards the nodes along the railway service corridors and such shift will tend to increase their land values (O’Sullivan, 1996).
In Hong Kong the distance of residential area to MTR station has significant impact on property value. Research from Tang, Chiang, Baldwin, & Yeung (2004) revealed that the closer a house to transit stops, the higher its value will be. Although property values are not only influenced by location factor, but also other factors such as size, building are, management property, other factors, accessibility to the transit stops is the most determinant factor influencing property values. During 1995 to 1998 property price rose by 46% from 4,200 HK $/square feet to 7,800 HK $/square feet or 15% annually, just before Asian crisis attacked.
Besides Hong Kong, Melbourne also experienced the same trend. By using hedonic pricing analysis method, Sim, Krause & Geidemen (2015) analyzed the effect of distance on residential property price around TOD Hill Box, Melbourne. They conducted 4 model estimates, linear, log, ring, and spline. The models are as follows:
- Linear Model : decreasing price of 13.8% for each increase of 1 km from the station.
- Log Model : decreasing price of 13.9% for doubling the distance from the station.
- Ring Model : homes located in the second ring (750-1250 m) are worth approximately 8.0% less than those in the nearest ring (0-750m). Homes in the third ring (1250 m and more) are worth 13.7% less than those in ring 1.
- Spline Model : price decrease similar to ring model, but for the distance greater than 1,500 m the price decline stops to occur.
Figure 13. Change in Value by Distance
Source: Eileen Sim, Andy Krause & Kimberly Winson-Geideman (2015)
Based on figure above, it can be concluded that property value will decline as the distance to TOD station increase. However, there is a limitation of distance that affects the price. The figure above shows that when homes distance to TOD is greater than 1,500 m, the effect of distance on homes is lost. This indicates that the public’s preference for property that does not have accessibility that can be reached on walking, would no longer interested in commuting to the TOD and would find alternative methods to fulfill their mobility needs.
Pilgram & West (2018) shows the same trends related to impact of mass transportation facilities on residential property value. Choosing Minneapolis as a study location, they analyzed the impact of station distance on residential property value within three time periods, when LRT first announced, when construction began, and when LRT began operating.
Figure 14. Home Prices in Minneapolis, 1990 – 2014 ($ 2014)
Source: Pilgram & West (2018)
The figure above shows that there was a more aggressive price movement in the period when LRT was announced until the LRT began operating. The average home price rose from US$160,000 in 1997 when LRT was announced to US$ 225,000 when construction began, or about 40,63% in only 3 years (13,5% annually). This number keep increase when LRT enters service period in 2004, from US$ 225,000 in 2000 to US$ 280,000 in 2004, or about 24,44% in 4 years (6,11% annually). From 2004, the home prices continued to appreciate to its peak period in 2007, reaching the number of US $ 340,000 or 21,43% increase in 3 years (7,14% annually), just the time before United States hit the housing bubble in 2008. Conversely, in the period before LRT was announced (1990 – 1997) house price movements tended to remain, even declining. This indicates that market expectations for LRT development is very high, causing home price increase rapidly in that period.
Another example related to market appreciation for TOD development is Austin, Texas. Under Austin Capital Metro Rail as an LRT operator, the construction of LRT began in 2008, and start operated in 2010. Before Austin’s LRT was build, TOD in Austin was limited to only being connected to BRT system. Yu, Zhang, and Pang (2017) conducted a study by taking 15,926 samples of residential houses in Austin TOD area for research.
Figure 15. Study Area and Parcel Selection
Source: Yu, Zhang, & Pang (2017)
The result of their research shows that using a linear model, within a one-mile study area, residential land prices increase as properties are closer to commuter rail stations every 1000 ft. nearer to station is associated with an additional land price ranging from US$ 0.12 to US$ 0.6 per square feet. Density indicators suggest that increasing mixed-use development around a station area will be translated into increasing land prices and therefore in a long run will facilitate economic growth.
TOD-based development is an effective solution in addressing housing and land use problems as well as a solution to suppressing private vehicle use and minimalize traffic congestion. If the core problems can be solved, then the derivative problems such as urban sprawl, environmental pollution, energy waste, and high social and health cost can also be reduced.
Based on description before, the benefits of developing TOD are as follows.
- Travel time saving, travel cost saving, and reduce dependencies on private vehicles so traffic congestion will reduce significantly
- Road safety benefits
- Concentrate land development and urban activities around the stations, reduce the potential of urban sprawl
- Better housing supply and options
- Positive property values impact within the transit catchment
- Financial gains to the government in terms of property investment, increasing property rates, and taxes
- Provide possible increase in economic growth and employment opportunities because of the emergence of new business center around station
- Environment health benefits in terms of reduction in roadside pollution (as a result of less road traffic), decrease in government medical expenditure and productivity gains (due to healthier workforce)
It should be noted that the implementation of TOD somewhere will be different from other places. Therefore, it is important to understanding TOD implementation strategy in each region. The challenge of implementing TOD in Jakarta is about integrated urban renewal, which is how to integrate and revitalize the area that has been built to become a new area. In Jakarta, there is almost no vacant land ideal for TOD development, therefore it is important to consider an ideal strategy to develop TOD. One of policy instrument that can be used is to consolidate land and collect idle or non-productive assets that owned by state-own enterprises (SOE) and government institutions. With various schemes such as joint venture, public private partnership and government-SOE partnership (KPBU), the TOD benefits could be channeled by many stakeholders in return of reducing investment costs.
It must be admitted at this present time, there is no single one TOD development projects in Indonesia that have been developed. Therefore, by understanding the theory and best practice about TOD, the stakeholders, government, SOE, private developers, and of course property valuers would have better understanding about TOD impact on real estate market and property value in the near future, in particular for developing countries that will implementing TOD based planning and development. Moreover, with this current property sluggish market in Indonesia, the development of TOD can also be a stimulus that will give new expectation for the market.
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