Going off the rails? Metro as a hedge against the decapitalisation effects of state-backed reference price polices on housing values

Housing prices represent the monetary equilibrium of the housing market, balancing the trade-off between housing and transportation costs, while still being subject to the imposition of price controls. In this research, we employed the hedonic difference-in-differences modelling approach to explore the role of metro stations in the (de-)capitalisation effects of price controls on resale property prices, using the imposition of the government reference price (GRP) policy in Shenzhen as an exogenous shock. Our findings indicate that metro stations act as a “hedge” against the decapitalisation impacts of the GRP policy, with properties located near metro stations experienced smaller price depreciations compared to those farther away. In addition, our study revealed that the “hedging effect” of metro stations decays as the distance from the metro station increases. The research findings provide policy implications that the implementation of price control measures must account for the spatially heterogeneous impacts of the GRP policy within and across the impact zones of metro stations. Ignoring these differences could widen the price gap between regulated and non-regulated properties.