Investing in the future: the advantages of buying property near airports
Why is property more expensive in certain locations? The price difference is often determined by transportation costs: the lower it is, the higher the price per square metre.
For instance, a factory located close to a highway will be more profitable than one located far from it as the delivery of raw material and end products are cheaper for the owner. Similarly, shops are profitable when they are located in a residential district as they cater to shoppers who want to buy things on their way home. Such commercial property is more expensive, as anticipated revenue determines prices.
The situation is the same in the residential property market – apartments near the city centre or public transport stops are always more desirable and expensive as their owners spend less time and money on commuting than residents of areas farther away. For instance, according to UK-based mortgage operator Nationwide, residential properties within a 500-metre radius of metro stations are £42,000 more expensive on average than those within a 1.5-kilometre radius.
The closer, the costlier (up to a certain point)
In terms of residential property prices, airports are just as important as metro stations are for particular districts. In urban areas with large air hubs, property is often more expensive than in the adjacent cities with no or fewer connections. According to Airports Council International, London Heathrow and Paris Charles de Gaulle are the busiest airports in Europe. At the same time, London and Paris are among the most expensive cities to buy residential property.
According to a study by Jeffrey Cohen and Cletus Coughlin, a 10% increase in the distance from Atlanta Airport reduces the value of real estate by 1.5%. Another study by Mr Cohen demonstrates that commercial property is 7.6% more expensive when they are 10% closer to Vancouver Airport. However, immediate proximity to airport runways has an adverse effect on property prices because of sound pollution. According to 14 different studies conducted between 2005 and 2016, every additional decibel reduces property prices by 0.2–1.7%.
The more tourists, the costlier
The growth of passenger traffic does not stimulate a rise in property prices per se. Instead, it is a positive sign that points to the growing number of tourists, infrastructure development and general economic growth, which indirectly affects the property market.
According to Eurostat, in 2013–2016, six of the 10 countries with the highest growth in the number of air passengers were also in the top 10 countries by property price growth rate (Figure 1). A perfect example is Iceland, the country standing at the top of both rankings, where air passenger traffic has doubled over the past three years and property prices have grown by 1.5 times.
New projects — new investment potential
The opening of a new airport or the expansion of an existing one is a sure sign that the local government expects the number of tourists to grow. Tourists generate short-term rental demand, while the demand growth stimulates average property prices to rise. Therefore, awareness among investors about future infrastructure projects can help them make the right decision when buying property.
Istanbul New Airport (İstanbul Yeni Havalimanı)
Istanbul’s will open another airport in the European part of the city in October 2018. Turkish media outlet Daily Sabah calls it the world's largest infrastructure project, valued at €10.5 billion. The airport will be home to 150 airlines and will handle 90 million passengers per year, which is comparable to the total number of passengers the city’s two existing airports handled in 2017. Turkey has been actively developing its air travel industry. In the past 15 years, the number of airports in the country has grown from 26 to 55, while the number of air passengers has grown from 34.5 million to 180 million.
The Central Communication Port (Centralny Port Komunikacyjny, CPK)
This project, located 40 kilometres from Warsaw, is potentially the biggest infrastructure project in Central and Eastern Europe. The first stage of the project includes the construction of an international airport to handle 45 million passengers annually — it is expected to be operational in 2027. The second stage is the creation of a high-speed rail line that will shorten the travelling time between Warsaw and the airport to 15 minutes and between the airport and other cities in Poland within 2.5 hours. The project, which is scheduled for completion in 2035, is expected to contribute to the development of Łódź City and lead to its gradual amalgamation with Warsaw.
Kastelli International Airport
The Greek property market is showing signs of recovery, and investors are putting their money into infrastructure projects, including the new Kastelli International Airport on the island of Crete, which will replace N. Kazantzakis airport (Greece's second-largest airport after Athens), built in 1937. The new airport, which will be completed in 2023, will be able to handle 9 million visitors annually, 3 million more than N. Kazantzakis. According to Greek Reporter, in 2017, there was a higher growth in the number of air passengers in Crete (10.8% to 7.5 million) compared to the rest of Greece.
The airport, located in the municipality of Murcia, has been vacant for the past decade. In late 2017, local authorities handed over its operation to Aena, which will open its doors to passengers this year. Corvera is expected to replace the existing Murcia–San Javier Airport. According to El País, during its first four years of operation, the new airport is expected to handle 800,000 international tourists, while total passenger traffic is expected at 3.5 million per year.
Scandinavian Mountains Airport
The airport on the Norway-Sweden border near the ski resorts of Idre, Sälen, Trysil and Engerdal will open in 2019. It will be co-managed by both countries. The project is valued at €110 million. According to its developers, the new airport will reduce travel time to local resorts, boosting their popularity among tourists.