# A Data-Driven Analysis on the Impact of High-Speed Rails on Land Prices in Taiwan
## 3 Application of System Dynamics
High-speed rail is is an attractive travel option for tourists who are limited by the length of the trip, as it allows for one-day trips and faster travel times between destinations. As the \"tourism\" industry grows, economic flows shift to accommodate the rising demand for related goods and services, such as hotels, restaurants, and other attractions, and trigger a dramatic increase in \"building costs\" and land values [38; 39]. Interest rates, being reflected in the borrowing rate for depository institutions, is a key factor in determining the cost of establishing a business and property price. The strong linkage between property and interest rate is not surprising given the heavy reliance on mortgage financing in the housing market [40; 41]. Apart from reducing mortgage rates that drive up property prices, lower interest rates induce consumption which raises the consumption rate and profitability of companies while injecting inflation into the economy. Indeed, [PERSON] and [PERSON] [42] found that inflation is among the key determinants of housing prices in a number of industrialized economies. Related to the cost of housing is the construction cost making up of fuel prices (as reflected by the energy price), building costs, and import material costs. According to [PERSON] [43], increases in the cost of construction should reduce the supply of new housing, but empirical research has failed to find a consistent relationship between these costs and housing. Other infrastructures, such as local public goods and education institutes, also play a significant part in driving property prices. The availability of various types of facilities and amenities affects the valuation of property prices, as it draws individuals and businesses to relocate nearby, especially for those that improve standards of living and the quality of life [4; 5]. At the same time, new transportation systems, such as an HSR, can affect the \"population density\" in the location served by the rail system thus influencing the government decisions on infrastructure development. The population distribution reflects the \"social\" setting of a country, with higher population growth and population density driving the demand for residential properties [44]. According to [PERSON] [45], the Western Corridor of Taiwan holds 94% of the country's population and densities average around 750 persons/km\({}^{2}\). Property developers will be attracted to develop pieces land into housing and residential communities, thereby increasing competition for the land which could be developed for other uses such as shopping malls or office buildings. When the rate of increase in demand for houses is faster than that of supply, residential property prices will rise. Furthermore, the closer the land is to the population center, the greater the value of the land. In contrast, land prices decrease with increasing distance from the city center [46]. Taiwan has urban projects that aim to develop lands surrounding HSR stations, according to the Bureau of High Speed Rail [47]. Some examples are airport-related industries, and urban logistics support have sprung out in the vicinity of Taoyuan Station. Further postulated relationships among the components and stocks are summarized in Table 1.