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Does traffic congestion affect the price of housing? YES, traffic congestion can impact a flat's price but whether the impact is positive or negative depends on how far the flat is from the central business district (CBD). It is well known, by economists and laymen alike, that housing located in city centres is generally more expensive than housing on the periphery. Much of this price differential, or location premium, arises because the city centre is where most economic, cultural and recreational activities take place. Nobel Prize winner Robert Lucas, for example, writes: "Production is centred on the city centre, and people live at differing distances from their jobs. In choosing a residential location, households face a trade-off between expensive land near the centre with small travel times, and cheap land farther out with large travel costs. Everyone who has looked for housing in any city or suburb knows the reality of this trade-off." In Singapore, housing in and around the CBD also enjoys an extremely high location premium. For example, for the period 2002-2012, the price of a private resale flat in Clementi was on average about $490 less per square foot than one in River Valley, which is about 9km closer to the CBD. Resale prices were even lower in Choa Chu Kang, which is an additional 5km farther away from the CBD than Clementi and nearly $625 less per square foot than in River Valley. Because much of the location premium is driven by travel costs, it is not surprising that this premium changes when commuting costs, such as the price of petrol or ERP rates, change. For example, one United States study found that a US$1 increase in the price of petrol reduces the value of the average commuter's home by US$5,000 (S$6,300) relative to a home near employment opportunities. Traffic congestion, however, is an area of commuting costs that has been largely neglected by economists. Clearly, the greater the traffic congestion, the longer it takes to get to work. This situation not only imposes a time cost but also a psychological cost. Hence, greater traffic congestion should increase the location premium as the additional costs increase people's willingness to pay more to live closer to the CBD. Differences in average prices in different locations, while informative, do not just reflect the location premium. Many other factors also affect flat prices. For instance, housing near the CBD might be more luxurious than houses elsewhere. Some areas may be more industrialised than others. Thus, to correctly measure the true causal effect of traffic congestion on the location premium, any analysis will have to remove the complicating effects of these types of different factors. In our research, we eliminated these factors by using two specialised statistical techniques. The first technique compares price changes of flats that are sold at least twice in the resale market. Since housing characteristics such as flat size or afternoon facing do not change over time, these factors should not contribute to any price change from the first to the second time the flat was sold. They are thus eliminated from the analysis. The second technique, called instrumental variables estimation, uses variables called instruments that influence traffic congestion, such as the number of expressways in Singapore, but have no direct impact on any other factors that affect housing price. Because the instruments move independently of the confounding factors, we can be sure that any co-movement in traffic congestion and the location premium are not capturing any effects of the confounding factors. In short, if we find that resale prices away from the CBD increase faster than in and around the CBD when there is more traffic congestion, then these statistical techniques ensure that it is traffic congestion, and not other factors, that causes the location premium to increase. The results of a study we conducted using data from 2002 to 2012 show that the average peak-hour expressway speed, our measure of traffic congestion, does indeed have a sizeable effect on the location premium. A flat 3km from the CBD appreciates 1.5 per cent more than one in the CBD when expressway speed increases by 1 per cent. A flat 10km away from the CBD would see an even greater payoff, appreciating nearly 5 per cent more than a flat in the CBD. Conversely, if expressway speeds slow and traffic congestion increases, the price of housing in the CBD will increase relative to housing in the suburbs. It is informative to consider what these numbers mean for particular flats. An increase in peak-hour expressway speed from 63km per hour, the recent historical average, to 64 kmh results in housing in Kallang, about 3km from the CBD, appreciating by $17 per square foot more than housing in the CBD. In other words, a 1,500 sq ft flat in Kallang would see more than a $25,000 increase in value compared with a similar flat in the CBD simply because of the change in expressway traffic. In Ang Mo Kio, about 10km from the CBD, prices would increase by $27 per square foot, and a 1,500 sq ft flat would appreciate by about $40,000. Due to data limitations, we were not able to measure the impact of traffic congestion on HDB housing. Nevertheless, the theory would suggest that HDB resale prices should follow a similar pattern. -- ST FILE PHOTO by Eric Fesselmeyer and Haoming Liu for The Straits Times The first writer is a senior lecturer and the second is an associate professor in the Department of Economics, National University of Singapore. Background story This is a monthly series by the NUS Economics Department. Each month, a panel will address a topical issue. If you have a burning question on economics, write in to [email protected] with "Ask NUS" in the subject field.

The city of Kinshasa in the Democratic Republic of Congo, with a population of about 10 million people, suffers from choking traffic, and the local police has decided to engage the help of two robocops. Well, they are technically stationary, but they're helping to keep pedestrians in the country's capital safer. The eight-foot tall, aluminum and steel robots are installed at two, high-traffic intersections to regulate traffic flow. Costing US$15,000 (S$18,960), the solar-powered bots were installed in June last year and were engineered by a team of local engineers to withstand the country's sweltering heat. Their arms act as traffic signals, while their chests display whether it is safe for walkers to cross the street. A speaker also says whether it is safe to cross. Surveillance cameras are also mounted in the shoulders in case anyone attempts to disobey traffic rules. While giant, humanoid traffic signal robots sound like something more likely to come out of Japan than the Democratic Republic of Congo, they merge the functions of human traffic officers and signal lights which means more cops patrolling the streets. Watch the robots in action below and see the public's reaction to the new additions to the police force. These may well be the closest to real-life Transformers as of now. Don't you think so? http://dai.ly/x1f88kv

In Italy, bicycle sales have surpassed that of car sales. Last year, 1.75 million bicycles were sold in the country as compared to 1.748 million vehicles sold. This is the first occurrence since the Second World War. Several factors could have contributed to this phenomenon. Firstly, the European debt crisis that resulted in job losses could have made some Italians turn to lower cost of transportation. In addition, escalating fuel prices and high costs associated with maintaining a car could have affected car sales as well. Recently, petrol prices hit

[extract] Guangzhou, the capital of the Guangdong province is the home to some 11 million residents. Like Singapore, the city is concerned about traffic congestion problems. Hence, from July 2012, the transport department will grant no more than 10,000 new car licenses per month. Out of the 10,000 licenses, 5,000 plates will be allocated via a lottery system while the remaining 5,000 will be auctioned off. The funds collected will contribute towards the development of the city

Live in the northern part of Singapore? If so, like many thousands of other Singaporean drivers, you must have at one point in time felt the frustration that comes along with being stuck in congestion along the not-so express CTE. If you do not, perhaps you might have tried driving along Orchard Road on the weekends during the Great Singapore Sale or the run-up to Christmas. Another frustrating exercise, to say the least. But, try tackling the normal "peak" traffic in one of our neighbouring countries and you might come to the sudden realization that most of our traffic jams are child's play. And by tackle, I don't mean sitting in the passenger seat while a "local" drives you around, marveling at how bad the congestion is. I mean actually driving a car in it; and make that a manual like most of the "locals" would drive. You don't even have to go very far - no need to head to Bangkok or Jakarta; even a short drive at peak hours in a busy Malaysian city will put things into perspective. I recently was in Malacca for the weekend and was attempting to drive out of the Melaka Raya area to the suburbs where I was bunking for the night. The short stretch of road that separated Mahkota Parade Mall and the Melaka Megamall (I believe it is Jalan Merdaka) was choked bumper to bumper with cars. It took 30 minutes to drive (if you can call it that) from the Megamall to the junction where Hotel Equatorial stands. I think my grandmother could walk that distance faster than I was able to drive! True, it wasn't exactly a jam that could rival Bangkok or Jakarta. But, driving along, I realized that I wasn't feeling any sense of frustration or impatience. If I were in Singapore, I think I probably would have exhausted my vocabulary of expletives in the first 15 minutes! Why is that a Singaporean stuck in a non-Singaporean jam evince such a non-Singaporean reaction? My gut-feel is that we are all so brain-washed by our endless efficiency mantra that when things are in anyway inefficient in Singapore, we start to feel upset. But because we expect delays in other countries, we are always that little bit more accommodating (well, there are still some Singaporeans who act like **** when overseas but most of us are more accommodating). So as I am stuck in traffic this weekend in Orchard Road. I will make it a point to grin and bear with it. Give it a try; it might make things more bearable too.

If you have read the papers a few weeks ago, you'd know that there was a massive jam on the Central Expressway and that it was caused by a major accident between a motorcyclist and 2 lorries resulting in the biker being killed. Now I'm not just talking about accidents on the CTE, it just happened by coincidence that such a tragic accident occurred a few days ago from when I'm writing this article, but I must say that the expressway is utterly terrible. I was caught in that jam on that fateful day. All I knew was that lanes 1,2 and 3 were completely shut and that only one lane was open for use. And from the papers it says that traffic didn't normalise till around 6 which is roughly 3 hours from when the accident occurred. But when does traffic REALLY normalise on the CTE? you go out on a Saturday morning and it's jammed before the Braddell exit. You head towards the SLE in the afternoon and it's jammed before the PIE exit. You can even try going back towards the SLE at 11 at night and it's jammed. So how can this expressway even be called an expressway in the first place when it's like driving through a slab of butter. Well, there has been a lot of effort to attempt to ease the congestion, but the simple fact of the matter is, it's not working. Yes you can add ERP gantries to suck our cashcards dry of credit and we are still crawling along at snail's pace. You can widen the road to 5 lanes, that shows some improvement in the flow of traffic but give it a few weeks, it's congested as usual. The main problem in my opinion is that the exits and entrances into the expressway are too close together which causes the bulk of the bottle necks and jams. Hopefully, the new lane markings and allocations will allow traffic to flow at a steadier pace and that all our taxpayers money will be put to good use!