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
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.”