High Speed Fibre Internet = Increased Property Value?

A hot topic that has gotten people talking lately centres on the proposition that high Internet speed or more specifically Fibre Internet, increases property value. Research in the US and the UK highlights the positive correlation between the two.

When google launched its gigabit Fibre service in July 2012, Google Access General Manager announced that a direct Fibre Optic connection to a home will improve the home value by between USD2,000 – USD5,000. A recent study by Wichita State University noted that “Kansas City housing market is clearly on the rebound” and that home values were expected to rise 2.7 percent in 2014, roughly a year after Google Fiber came to the city.

Verizon (USA) on its website cited a 2008 study conducted by Park Associates: Multi-Dwelling Units (MDUs) residents estimated the rental value of a standard (2-bedroom, 2-bath, 1,000 square foot) apartment offering Verizon Fios Fibre Internet to be an average of 5% more per month than one offering DSL/satellite/cable services. This study supports academic researcher Gabor Molnar from University of Colorado, whose 2013 study found that “…The presence of fiber-based broadband was associated with a positive effect on property values in the neighborhood… Fiber availability may drive real estate prices upwards…”

There has been an explosion of demand for Fibre Internet in recent years. For instance over 1100 cities in the US are in line with requests that Google introduce Google Fiber in their municipalities. Cities that fail to get picked for Google Fiber are looking for ways to either build it themselves or partner with someone who will do it for them. “It’s getting to the point where, if my neighboring community has a gig and we’re still doing satellite, the property value in that town is going to go up,” – Deb Socia, director of Next Century Cities a coalition of cities working to provide Gigabit Internet services to their residents.

In the UK, broadband speed is now regarded as the “fourth utility” after gas, water and electricity, said BBC property expert Henry Pryor. “I was involved with a survey that looked at the impact of broadband speed on people looking to buy or rent and the potential impact on prices and we found a home without at least a standard broadband connection could be worth up to 20 per cent less than a comparable property,” Mr Pryor said. “A property needs 21st century connectivity. More people are making decisions to work from home fulltime or even part of the time. More demanding buyers now want Fibre-Optic superfast speeds for things like streaming entertainment and managing a host of equipment that relies on this.”

According to a study of British homebuyers, a good broadband connection now tops off street parking and access to local amenities as one of the vital deciding factors for people buying a new house. The study also found that one in ten buyers have walked away from properties with poor internet connection and that broadband is connected even before gas. Home owners in London are also willing to pay up to 8 per cent above the market price for properties in areas offering very fast internet speeds. 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.

Website Rightmove.co.uk has added broadband speeds and availability to its lists of houses for sale, and the information is attracting 400,000 page views per month. Around 3,000 of its users have reported that speedy broadband is now more important than transport links or schools. One estate agent lamented that a buyer pulled out of bidding on a £6m house in the Cotswolds, England because the internet access was so poor. “Some buyers have the broadband tested and subsequently pull out because it isn’t fast enough,” says Rupert Fisher of real estate agency Savills.

While demand for high-speed Internet in Australia is ever increasing, the actual fibre roll-out is a different story. NBN Co has plans to use the existing copper in MUDs to deliver the ‘last mile’ connection to apartment units rather than utilising full Fibre connection as it had done during a trial roll-out phase. This unfortunately would eventuate in less than stellar speed performances. Even more unfortunate when other telcos are using similar technological approach. Only MUD residents in Australia privileged enough to receive true Ultra-Fast speeds rather than ‘up-to’ speeds could conceivably see their property value going up as in the US and UK.

References:

  1. http://www.bizjournals.com/kansascity/print-edition/2012/10/05/tech-firms-will-go-residential-to-tap.html
  2. http://gigcommunities.net/closer-look-property-values-gigabit-internet/
  3. http://realestate.wichita.edu/draft/research/Web/Forecast/2014/WSU%20HOUSING%20FORECAST%20KANSAS%20CITY%202014.pdf
  4. http://communities.verizon.com/residential-properties/
  5. http://nextcenturycities.org/
  6. http://www.lse.ac.uk/newsAndMedia/news/archives/2014/07/InternetSpeed.aspx
  7. http://www.telegraph.co.uk/technology/broadband/10671273/Slow-broadband-wipes-20-off-house-prices.html
  8. http://www.silicon-flatirons.org/documents/conferences/2014-04-29%20LA%20Cable%20Workshop/Molnar-Preliminary%20Evidence%20from%20the%20Deployment%20of%20Fiber%20on%20Real%20Estate%20Prices.pdf
  9. http://www.sccialphatrack.co.uk/assets/Benefits%20of%20Fibre%20to%20the%20Home%20v2.pdf
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