Home Prices and Broadband: Correlation and Causation

Does the quality of broadband service affect home prices in the United Kingdom, and if so, what is the impact? In some surveys, conducted in 2014 and since indicate consumers would pay more for a home with fast broadband.

Likewise, studies of the link between broadband and economic growth show correlation, at the very least. One study by the World Bank noted that “almost every study, despite the methodology and whether it was cross-country or single country, found a positive economic impact from fixed broadband.”

First of all, note the language: “correlation,” not “causation.”

Also, the “results were sometimes not statistically significant (particularly for developing countries).” In those cases, even correlation cannot be assumed.

A study conducted by the Public Policy Institute of California likewise notes a “positive relationship between broadband expansion and economic growth.”

But “the data and methods do not definitively indicate that broadband caused this economic growth,” the institute says. Still, some claim a causal relationship.

And some studies suggest U.S. home prices might also be affected in the same way, some suggesting difference in value could be three percent to as high as 20 percent.

source: Univerisity of Wisconsin Extension

But “correlation does not necessarily equal causation,” say some researchers studying broadband and home prices.

It is possible that fiber availability drives real estate prices upwards. It also is possible that other  variables “may jointly determine both real estate prices and fiber presence.

“Residential properties in markets with high-speed broadband access would be expected to have greater value,” they say. “However, good quality broadband infrastructure is also expected to be rolled out first in high-income areas with high-valued real estate.”

Logic suggests there is some room for such effects in areas with highly-variable internet access service and virtually zero effect in areas where fast internet is ubiquitous.

Some studies suggest there is a relationship between home prices and fast broadband. But lots of variables, including age, income or wealth and race also are correlated with home prices.

A recent study by Housesimple in the United Kingdom looked at the relationship between low-speed broadband and faster broadband within a single postcode. That study shows significant differences on particular streets.

Address	Postcode	Average broadband speed on the street (Mbps)	Current average house price, street (£)	Current average house price, postcode district (£)	% difference - prices on street vs postcode district
Poplar Avenue, Oldham, Greater Manchester	OL8 3TZ	0.221	105,977	116,033	-8.7
St David's Close, Worksop, Nottinghamshire	S81 0RP	0.290	107,819	185,936	-42.0
Milton Road, Cowplain, Waterlooville, Hants	PO8 8LD	0.338	270,134	329,028	-17.9
Cross Lane, Bebington, Wirral, Merseyside	CH63 3AD	0.354	195,553	231,846	-15.7
The Willows, Acaster Malbis, York, NYorks	YO23 2XE	0.463	215,593	356,282	-39.5
May Tree Lane, Waterthorpe, Sheffield, SYorks	S20 7HA	0.467	108,782	185,681	-41.4
Turnpike Road, Connor Downs, Hayle, Cornwall	TR27 5DT	0.483	282,182	256,084	10.2
Rothbury Gardens, Plymouth	PL6 8TU	0.492	241,516	224,665	7.5
Lancaster Road, Out Rawcliffe, Preston	PR3 6BN	0.549	236,558	262,371	-9.8
Moseley Wood Gardens, Cookridge, Leeds	LS16 7JB	0.551	250,796	339,084	-26.0
Blackstone Avenue, Glasgow	G53 5DW	0.669	90,834	165,505	-45.1
Fosbrooke Road, Small Heath, Birmingham	B10 9JS	0.679	147,905	153,421	-3.6
York Crescent, Stourbridge	DY8 4RT	0.718	226663	224,042	1.2
Graham Park, South Dell, Isle of Lewis	HS2 0SP	0.718	86,679	118,718	-27.0
Coppice Farm Park, St. Leonards, Tring	HP23 6LG	0.719	211,333	556,974	-62.1
Oak Close, Little Stoke, Bristol	BS34 6RA	0.831	230,314	259,671	-11.3
Maesyrhendre, Ammanford, Carmarthenshire, Wales	SA18 2BW	0.839	81,399	142,626	-42.9
Phoenix Boulevard, York	YO26 4WX	0.853	250,205	305,653	-18.1
Gratrix Lane, Sowerby Bridge, Calderdale, SYorks	HX6 2PX	0.922	123,098	188,444	-34.7
Laburnum Drive, Milton of Campsie, Glasgow	G66 8HY	0.948	196,328	198,557	-1.1

source: Housesimple

The research revealed that house prices were on average 24 percent lower on the streets with the slowest broadband speeds, about £182,983 compared to £240,031 for the postcode district.

What we do not know is whether there are other explanations for lower house prices on those streets.