Many factors affect property prices. It’s often thought that crime rates are one of them. It’s sometimes thought, for example, that the cheaper parts of town suffer from higher levels of crime – while the areas with higher property prices are regarded as better or safer.
But is there any truth in that? Here’ll we’ll look at the possible relationship between crime levels and property prices in more detail, and consider some of the issues property buyers and investors might want to bear in mind.
Firstly, why might the level of crime in a particular area affect property prices there?
It’s really hard to pin down why this might be!
It might be sensible to assume that the long-proven principle of supply and demand applies. Most people would prefer to live in low (or ideally no) crime areas if possible. So greater demand to buy there may well push prices up in those areas. There’s likely to be comparatively softer demand for property to buy in higher crime areas, which in turn means prices are lower.
The way in which crime affects prices is also likely to be true of rents. Oddly though, areas with higher crime and so lower prices could well mean stronger yields for investors.
But is it really that simple? Let’s look at if that works on the ground ....
Inner city areas often suffer higher crime levels and have lower property prices. Which kind of validates the theory.
Likewise, suburban and commuter areas often have moderate crime levels and higher prices.
But rural areas generally have lower prices (with the exception of second home hotspots) and generally lower crime rates. Which kind of disproves the theory.
Also, city centre areas often have high crime levels but can also have expensive city living properties. Which also disproves the idea that higher crime areas have depressed property prices as a result.
It’s perhaps important to bear in mind that not all crime is the same. So the levels of different types of crime may well affect property prices (and rents) in different ways. It’s not too difficult to defend a property against burglary, for example, so burglary rates might have very little impact. However if a property is located in an area which has a problem with violent crime, drug-related crime or gun crime it’s pretty much impossible for buyers or investors to do anything about it so the impact ought to be much greater.
Perceptions are very relevant too. If buyers simply think that an area has a crime problem this could soften prices, even if it the position on the ground doesn’t actually bear this out.
So is there any reliable research which links property prices and crime rates – including information which buyers and property investors might find useful?
Here are a few studies which have looked into the issue:
A study in the US suggested that only violent crimes exert a meaningful influence on neighbourhood housing values. It said that a 10% increase in violent crimes within a neighbourhood could affect housing values by as much as 6%.
One study by a researcher at the London School of Economics found that vandalism and graffiti have a significant impact on house values, but that burglary and violent crime levels in an area do not.
The study seemed to suggest that ‘visible’ crimes – crimes that make an area look run down and less desirable – will affect property prices. But more serious crimes that may be hidden in plain sight so to speak do not.
A study by a researcher at Newcastle University and published in the Urban Studies Journal offers some more detailed information:
This study suggests that each case of anti-social behaviour per ten population in the same street leads to an approximately 0.6-0.8% drop in property prices. A corresponding increase in violent crime decreases prices by roughly 0.6-1.6%. A corresponding increase in non-violent crime by about 0.2-0.4%. The majority of estimates were at the upper end of these intervals. It said that estimates for robbery, burglary and vehicle crime were either zero or positive, but possibly biased because of reverse causality.
Interestingly this study suggested that crime outside of the respective street does not appear to affect prices in that street at all.
So what if any conclusions can we draw about any links between crime rates and house prices?
It’s probably true to say that, yes, there is a link between crime rates and house prices. Areas with higher crime rates are likely to see house prices lower than they would otherwise be because of that. But it very much depends on the type of crime. And the way that crime affects house prices is probably not as much as you might think. Other factors like location, local transport, schools and supply and demand have much more of an influence on house prices.