House prices will rise if rail standards improve

When the Fehmarnbelt link opens, property prices along the Copenhagen-Hamburg corridor are set to rise. By how much, however, is dependent on the investment in the railway. The proximity to an efficient rail link is crucial, states a new report*) from Femern A/S.

The report forecasts a substantial rise in property prices if properties become more accessible.  A 10 per cent rise in accessibility (i.e. 10 per cent shorter travelling time) will increase prices for all residential properties in the area in question by 1.3 per cent.

The expected improvement in accessibility is clearly linked to the extent of the investment in the rail network. The report sets out three scenarios:

Scenario 0
The only improvements are investments in the coast-to-coast link across the Fehmarnbelt. Travelling time will remain unchanged apart from the journey across the Fehmarnbelt itself and road transport is generally faster than trains.

Consequently, there will be no effect in terms of larger urban areas and no measurable impact on house prices either on the Danish or the German side of the link.

Scenario 1
In addition to the investments in the coast-to-coast link itself, there will be investment in the rail network on land, which will result in passenger trains running at average speeds of 100 km per hour between Hamburg and Copenhagen, with stops at eight stations.

The train will be the fastest means of transport to the areas within the vicinity of the stations. In this scenario, the calculations show that house prices in towns and cities with stations will rise by close to 2 per cent.

Scenario 2
Both Germany and Denmark will invest in a high-speed rail network and TGV-type trains with an average speed of 165 km per hour.  Travelling time between Hamburg and Copenhagen will be 120 minutes with stops at eight stations.

Non-stop connections between Hamburg and Copenhagen will reduce travelling time to 90 minutes at an average speed of 220 km / per hour.
 
As a consequence, accessibility to metropolitan regions will improve significantly. Under this scenario, housing prices will rise by between 7.5 and 8.5 per cent in cities and towns with stations, including Fehmarn and Lolland-Falster.

According to the Danish Transport Minister Hans Christian Schmidt, no financial resources are available for a new high-speed rail link between Copenhagen and Hamburg, which means that Scenario 2 is unlikely to materialise. More modest investments in the rail line between Hamburg and Copenhagen (under scenario 1) will, according to the report, still result in moderate increases in property prices of around 2 per cent.

Stations and jobs for spouses
Real estate agent Flemming F. Bentzon from Nybolig in Nykøbing Falster who specialises in the housing market in Lolland-Falster, agrees with scenarios' conclusions.

"It’s difficult with percentages, but I think that the rise in prices is correct providing we get the stations," he says. "Fast train connections across Lolland-Falster are not a solution in themselves. Price rises are dependent on whether we can get people to move here - and then it's vital that their spouses can find work in the area.  If both have to commute, everyday life will be difficult, especially when it comes to picking the kids up from school.”

Do you see Danes moving south of the Fehmarnbelt and commuting from Germany?

"It all depends on cost. Providing German prices remain stable and house prices, cars and food are cheaper, and if people can keep their jobs on the Danish side, then I think that some people will go for it - as happened in the Øresund Region after the opening of the fixed link between Sweden and Denmark. However, the pain threshold is around an hour and fifteen minutes of commuting. We can see this today as this corresponds to the distance from Falster to Copenhagen," says Flemming F. Bentzon.

Björn Petersen, a German real estate agent from John Spiering Immobilien e.K. in Kiel, is of the opinion that a fixed link will have effects on the property prices in northern Germany:

"Basically, every development axis, especially a worthwhile ecological one such as the railway, is to be regarded as a positive infrastructure measure. There are 3 zones here: The zone affected by the emissions, the zone which benefits directly and is no longer affected by emissions, and the zone that can only benefit from additional measures such as development of the hinterland. In this respect, the details are also to be taken into account here. The price development depends on which zone is involved.

In summary, positive effects are to be expected. It cannot be excluded, however, that there will also be disadvantageous developments in some sub-areas. They can turn out to be less extensive or even be inapplicable if the overall measure develops a far-reaching effect. If the three zones produce synergies amongst each other, then they can all benefit", he says.

^{*) “The Fehmarnbelt Fixed Link: Regional Development Perspectives” will be published in January 2011. The report is the result of an analysis conducted on behalf of Femern A/S by a team of researchers from Sweden, Denmark and Germany under Professor Christian Wichmann Matthiessen, University of Copenhagen.}