This past week, my ECONS102 class covered hedonic demand theory, which suggests that when you buy certain goods (like houses, cars, computers, or land), you are really buying a bundle of characteristics, and each of those characteristics individually has value. So, when you buy a house, you are really buying a bundle that includes a number of bedrooms, bathrooms, car parking, views, and access to local amenities. And when those characteristics change, then the value of the house will change.
So, it should be no surprise then that the City Rail Link (CRL) will change property prices, since access to good transport links is a valued characteristic. And buyers are taking notice. The exact opening date of the CRL has not yet been announced, although it has been expected in late August or early September. And yet, in anticipation of higher land values in the future, the demand for land around stations that will benefit from the CRL has increased now. As the National Business Review reported back in June (paywalled):
On the residential front, and after reviewing Real Estate Institute data, CBRE found that while Auckland residential prices have risen 29% since 2016, prices around station catchments – defined as a 10-minute walk (about 800 metres) to catch a train – have climbed by an average 36%.
The top-performing areas were Morningside, Kingsland and Baldwin Avenue in Mt Albert, which came in at 108%, 95% and 84% respectively, despite a similar increase in supply during that time...
If you correctly anticipated that the price of an asset would increase in the near future, and you bought it now, you would reap a 'windfall gain'. However, by buying the asset now, you are increasing demand for that asset. And if lots of others also anticipate higher future prices and decide to buy now, that increased demand (and competition for the asset) will tend to drive prices up now. That theory is consistent with the observed increase in property prices, which the CBRE report notes is concentrated around stations that will benefit from the CRL and not other suburbs.
A combination of anticipatory demand and hedonic demand has pushed up land (and house) prices. Hedonic demand explains why improved transport links are valuable, while the anticipatory demand effect explains why that value can appear before the first CRL train even runs.