Everyone knows the old adage, “crime doesn’t pay”.
But is it true for the property? And how much attention should property investors pay to crime rates?
You might expect that fewer people want to live somewhere with a high crime rate, meaning high crime causes the property market to suffer. But this isn’t always the full story.
A large body of academic research indicates an obvious causal relationship between property prices and crime, and some similar results have been identified here in Australia.
A 2014 study published by researchers at the University of Technology Sydney, found that murder caused a 4% decrease in the value of Sydney properties within 0.2 miles of the crime scene. Greater media attention or proximity to the murder made this effect more pronounced. However, strangely, there was no such effect within the rental market, and value decreases were short lived.
Other studies have also begun to question the conventional thinking.
In 2018, a report conducted by Infrastructure Victoria did offer support for the notion that violent crime decreases property values – but only among regional markets. In metropolitan suburbs around Melbourne, crime had no discernible effect upon property markets.
Researchers at Infrastructure Victoria hypothesised that rather than the rate of crime itself, it is variations in the rate of crime that are most to blame. For example, while city-dwellers are more likely to experience a higher base level of crime regardless of exactly where they live, fluctuations in regional crime are proportionally more pronounced, since regional areas typically experience far lower levels of crime. Thus, small increases in regional crime cause a dip in prices, while city property prices were immune to similar fluctuations.
In addition, the report found that non-violent crime like theft had no impact upon property values anywhere. This may perhaps be down to the perception of theft as mostly preventable, compared to the obvious psychological impact of violent crime.
Moreover, Chris Eves, property economist at Queensland University of Technology, has identified further stratification of the impact of crime across market levels. Both high and low value Brisbane suburbs exhibit similar price changes in response to assault and other violent, personal crimes, while middle value suburbs suffered more so in response to theft, and other property crimes.
So, what are investors to make of all this?
Surprisingly, it’s a somewhat difficult question to answer, and it’s one that’s heavily reliant on context. While high crime rates are more likely to be a negative than a neutral factor, the location in question plays an important role in assessing just how likely crime rates are to affect an investment. Nonetheless, as an added source of potential risk, crime might just be something to bear in mind as you research your next investment opportunity.
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