The Impact of New Metro Stations on Rental Prices in Moscow

Moscow metro is expanding each year, having profound effects on the rental and real estate market. Improved transport accessibility is reflected in housing prices. This paper analyzes literature on the topic of influence of transportation structures on property values and rents describing all modern methods of research. It uncovers trends for Moscow of 2018 that establish increasing housing prices and diminishing rentals. Predictions for the influence on rents are made through tenants’ maximization problem. They state inverse relationship of distance to the closest metro station on prices, but leave the total effect of construction of a new metro station ambiguous due to the presence of indirect costs. Empirically, this paper confirms that in Moscow there is a difference between the rental offers for apartments that already have an access to a metro station and those who will get it in 2018/2019 demonstrating that already functioning metro station nearby increases rental prices on average by 8.1%. It was found that natural amenities do not bring much value to rental prices, while the negative effects like pollution or noise caused by new metro stations are not captured by proximity to them. Moreover, empirical study confirms an inverse relationship of distance to the closest metro station and rents. However, many renters were aware of future benefits and exploited this information in offers, thus, prices could rise more than by eight percent in total.