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UPD Doubling Broadband Speeds Can Boost UK House Prices by 3 Percent

Posted Monday, August 4th, 2014 (8:08 am) by Mark Jackson (Score 967)
new home construction

The London School of Economics and Political Science (LSE) and the Imperial College Business School has examined 15 years’ worth of data to identify the impact on UK house prices of faster Internet access. The conclusion found that property prices increase by an average of around 3% when the available broadband speeds doubled.

It’s long been known that access to good broadband can improve the attractiveness of a home, which is largely a consideration of common sense, although placing an exact figure on this is rather challenging because requirements and property prices vary from place to place and person to person (i.e. the decision is always about more than a single service).

Never the less the new study, which also found that an increase from 8 to 24Mbps raises the property value by no more than 1%, claims to have adopted a much more evidence based examination of this by looking at data for over 1 million properties across England (collected between 1995 to 2010). Crucially the study compared homes that were considered similar in terms of size, access to amenities and area, but which had different quality Internet connections.

The results revealed that houses with access to faster connections, such as those which were situated closest to the local telephone exchange (pre-2010 most broadband came via ADSL / ADSL2+ lines and some cable), had higher prices than similar properties further away.

The potential availability of faster connections is likely to be less relevant here since FTTC didn’t really see much coverage until after 2010. However we’re not sure how useful the data for pre-2000 will be, given that the Internet didn’t really take off until affordable broadband (ADSL and cable) arrived and before that dialup was often felt equally rubbish for nearly everybody (note: the use of figures like 8Mbps and 24Mbps in the report also suggests that LSE used advertised rather than real-world speeds for their study).

Professor Tommaso Valletti, Imperial College Business School, said:

Many factors impact on the price of a house such as area, amenities and transportation links. Our study is the first to look at how broadband can also affect property prices. This study shows that when it comes to the access to the internet, speed matters. In this digital age a fast, reliable broadband connection is important; more of us are working from home and using an internet connection to stream TV programmes, make video calls and to browse the web.

The EC has set an ambitious target for all European citizens to have access to high speed connections [ISPr ED: 30Mbps+ by 2020]. Private provision alone may not be able to supply fast enough connections to people across the whole country. Governments need to intervene so that everyone can have access to high speed internet.”

The results unsurprisingly claim that the biggest improvement in property prices is usually experienced in areas that have previously only had access to slower connections, such as rural locations. Elsewhere home owners in London were found to be the most willing to pay for faster Internet speeds, which appeared to benefit from a boost that could be worth up to 8% above the market price.

The news comes at a time when the Government aims to make fixed line superfast broadband speeds of 24Mbps+ available to 95% of the population by 2017, which rises to 99% by 2018 when you include mobile and wireless solutions. But report contributor Gabriel Ahlfeldt suggests that, “In rural areas it would make more sense for governments to adopt less expensive fixed and mobile technologies that deliver decent and reliable speed, [while] in urban areas a levy on landlords, who ultimately benefit from the improvements, could help saving taxpayers’ money when rolling out fibre.”

In other words LSE’s study appears to be advocating the Government’s existing approach in rural areas, while suggesting that a pure fibre optic deployment in urban areas would be a better approach provided the right funding model could be established to help pay for it. As ever though, the decision about how much you pay for a house will always come down to the simple matter of personal choice, although for most people access to good broadband is a key part of that equation.

The full study is linked below, although sadly at the time of writing we were unable to load the website.

LSE House Price Study
http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

UPDATE 12:30pm

Here’s a comment from Hyperoptic’s boss.

Dana Tobak, Managing Director of Hyperoptic, said:

We welcome this report, which confirms that hyperfast broadband makes a property more valuable. Many buildings that we have connected with our gigabit broadband were on less than 5Mbps – leading to a negative online experience. Residents frequently tell us that, after having our fibre installed – enabling 1 Gig, they believe their home has immediately become more marketable.

In this digital age, broadband connectivity is a necessity and hyperfast speeds are essential to be able to maximise our online lives.”

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15 Responses
  1. TheFacts

    Statistics compiled over a 15-year period, from 1995-2010, show that property prices across the UK increase on average by about 3 per cent when internet speed doubles.

    While the increase in value is even greater when starting from slow internet connections, an increase from 8 to 24 megabits per second raises the property value by no more than one per cent.

    Does this make any sense?

    • FibreFred

      Isn’t it saying the increase is greater between 1-8, but less between 8-24?

    • The 8-24Mbps figure is just a single specific example but they looked at others to reach the average (max and lows). Unfortunately the full report still won’t load so we can’t see the details.

  2. DTMark

    I’m not sure the data can be relied upon, because it isn’t possible to collect the data regarding people who look at properties on, say, Rightmove, but then don’t buy – or even view – because all there is, is ADSL, and who then go looking at other properties only viewing the ones that are cabled.

  3. Raindrops

    Do not see how any single thing over the course of 15 years contributes to house prices. Prices in that time have gone up and down for numerous things, most nothing to do with broadband.

    • GNewton

      Actually we do see that all the time in local rural areas where we are: Empty properties being on the market for years because nobody wants them because there is no broadband.

    • FibreFred

      And that was their primary reason then? Sounds like their’s a killing to be made, buy them cheap, fit them with Sat connections and sell them on

    • IMO a Satellite connection would do more to put me off than entice. I’d rather have a slower fixed line with good usage allowances, fast latency and proper Internet connectivity.

    • Raindrops

      Hate to do it but have to agree with fred. If you really fall in love with a rural property you fall in love with it for reasons other than broadband.

      Far more things affect house prices than broadband no matter what reports say. House prices in London for example have shot up in recent years, makes bugger all difference if the property has “fast” broadband or not.

      House prices in my street and the amount they fluctuate up and down has not changed one jot since the arrival of FTTC. They still year on year raise or fall about the same. Actual developments in the town such as new shopping estates, roads, business etc have added far more value to my property in years gone by than broadband improvements have.

      As to people looking to buy a real rural property id hazard a guess things like views, amount of land, general location and much more all are of more importance than broadband. It probably is on the list of requirements but nowhere near the top. If i wanted to live rurally and found the perfect property with pure peace and quiet and perfect views i would not give a toss what broadband i would get from a phone wire, id actually if desperate for more speed go for mobile or satellite as a solution. To refuse the perfect home rural or not over not having cable or FTTC available to me is just madness.

    • FibreFred

      Mark

      It very much depends on the buyer and their internet use. Avid gamer, watcher of HDTV… its a no

      But an average net user, email browsing etc Sat would be fine

    • Oh yes I agree Fred, but then if you only want the Internet for the basics a Satellite still isn’t likely to help. In that situation a slower fixed line is both viable and cheaper.

    • Raindrops

      Satellite would probably be ok for most things except gaming and possibly things like skype (though ive seen video calls a right mess on even low latency connections). Streaming and video should not be an issue assuming the actual connection speed is good enough. Latency is not as bad as it used to be on satellite, though agree would not be up to par for hardcore gaming in most cases. Though i assume thats still a pretty small percent of users.

  4. john

    well that’s a load of tosh they display some shite on here .

  5. DTMark

    What is even more entertaining is seeing office space with no broadband to speak of, only ADSL with nearly nil upstream and not much better downstream, and no access to Virgin’s cable network.

    And seeing premises still being built with no useful connectivity. There is such a place just near here which has, AFAIK, never had a single occupant, and it’s now up for sale again.

    • Raindrops

      Now that i would agree with if this were based on office/business space you can buy/rent and good broadband speed increasing the price of that space then i would say YES entirely possible.

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