The impact of the Moscow central circle launch on residential property rental rates

Abstract

The launch of the passenger rail service on the Moscow Central Circle (MCC) in 2016 was a major event for the city and had a significant impact on its development. This paper is dedicated to one of its most important effects — the changing dynamics of residential rental rates caused by improved transport accessibility. Three datasets were collected from open sources (6 months before the MCC launch, the month of the launch, 7 months after it) and included rates and characteristics of all rental flats in Moscow. The hedonic price model revealed that the proximity to any MCC station had a positive impact on average rental rates after the system started operation. However, negative externalities associated with living near an open-air railway lowered average rental rates, but the scale of this effect declined throughout the observation period. The research also demonstrated that the impact caused by the MCC launch differs depending on the predominant land use type around the station. Mixed-use territories benefited the most from the new transport system, whilst it had almost no effect on residential areas with convenient access to the Moscow Metro. On the other hand, rental rates in residential districts deprived of metro stations and mostly industrial territories were positively affected, but the low significance of the model’s outputs in these cases does not allow definite conclusion to be drawn. Nonetheless, the overall positive effect of the MCC launch on rental rates provides evidence of resulting hidden benefits for the urban economy which can partly compensate for the initially large investments in this transport project.