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Internet speed closely linked to property values

Internet_140pixelsHome owners in London are willing to pay up to 8 per cent above the market price for properties in areas offering very fast internet speeds, according to a new study.

The capital’s willingness to pay a premium for good internet coverage strengthens the case for rollout of high speed broadband in densely populated areas, argue researchers from LSE and Imperial College Business School.

In the first study of its kind, researchers have analysed the value of broadband to English households, looking at the link between property prices and broadband availability.

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.

Londoners show a greater willingness than the rest of the country to pay for broadband, reflecting very high usage in the capital city for both work and personal reasons.

Dr Gabriel Ahlfeldt“Speed matters,” says Gabriel Ahlfeldt, Associate Professor of Urban Economics and Land Development at the London School of Economics and Political Science.

“The European Commission has set a target by 2020 that every European citizen will need access to at least 30 megabits per second and at least 50 per cent of households should subscribe to internet connections above 100 megabits per second.

Tommaso Valletti, Professor of Economics at Imperial College Business School, added: “The target is ambitious and suggests that private provision alone may not be able to supply fast enough connections to people across the whole country.”

Currently, internet connections are provided via ISPs such as telecom and cable suppliers but there is growing pressure on governments to intervene and make high speed broadband universal.

However, while urban areas pass the cost benefit test of rolling out fibre broadband infrastructure by a large margin, the opposite is true for rural areas, researchers say.

“In rural areas it would make more sense for governments to adopt less expensive fixed and mobile technologies that deliver decent and reliable speed,” Assoc. Prof. Ahlfeldt adds. “In urban areas a levy on landlords, who ultimately benefit from the improvements, could help saving taxpayers’ money when rolling out fibre”.

The study’s findings are published in a discussion paper released this month. For more details go to: http://www.spatialeconomics.ac.uk/SERC/publications/default.asp

Notes to editors

For interviews and/or more information, please contact Gabriel Ahlfeldt on +49 163 2462950, g.ahlfeldt@lse.ac.uk| or Candy Gibson LSE Press Office on 020 7955 7440, or c.gibson@lse.ac.uk

The authors of the study are Associate Professor Gabriel Ahlfeldt (LSE), Dr Pantelis Koutroumpis (Imperial College Business School) and Professor Tommaso Valletti (Imperial College Business School and University of Rome).

31 July 2014