How crime stops property growth

A single year of high crime growth in an established residential area can be detrimental to house price inflation for at least two years thereafter, before the effect starts to slowly taper off.

In residential estates, a 20 percent rise in contact crimes generally resulted in an estimated 0.4 percentage point drop in residential price growth in these estates in the same year, according to an analysis of the impact of crime on property prices by Lightstone.

Paul-Roux De Kock, the data and analytics director at Lightstone, said the impact on residential property prices in estates might not sound like much, but considering that luxury properties currently only grew at about 4.5 percent year on year, homeowners lost out on almost a tenth of the growth they could have experienced during that year.

"Not only does crime growth have a direct impact on property inflation, but past high crime experience in an area has lasting effects that subdue property price growth for years to come," he said.

De Kock said in established areas where there were few significant new residential developments, such as around the Rosebank, Norwood and Bramley police stations, the growth or decline in residential related crime from 2010 to 2011 had a strong correlation with the property inflation experienced in 2011. It had an even stronger correlation the following two years.

He said the converse was also true and a huge reduction in residential crime would generally have a positive impact on property price growth in the years to come.

However, De Kock said the crime reputation effect was much less pronounced in developing areas because the inflow of more residents distorted the crime growth picture.

It was also important to understand the interplay between different market sectors and different types of crime. Lightstone found a very strong relationship between contact crimes experienced in estates and sectional schemes, and the house price growth experienced in that same year, De Kock said.

One explanation for this would be that the combined effect of these closed communities and the nature of contact crimes normally resulted in people within the community spreading the news faster.

Potential buyers were therefore more likely to get to know about the crime wave and potential sellers were likely to sell at a lower price that same year.

De Kock said the "bad reputation effect" was generally more lagged in the middle income freehold sections of the property market, where property price growth tended to have a closer relationship with crime rates five years ago than crime experienced that year.

This indicated the market might be taking longer to catch on to the idea that it was a bad area and it also took longer to respond to positive improvements because the news travelled slower than in closed communities, he said.

  Comment on this Article

  Please login to post comments

Post to my facebook wall
Characters remaining

    Latest Property News
    • 21 Feb 2018
      These days most buyers are using online property portals like Private Property when house hunting due to the convenience, up to date information and variety on offer. “The property portals have revolutionised the way buyers shop, but they do need to be cautious – viewing photos online is no replacement for viewing the property in person,” says Bruce Swain, CEO of Leapfrog Property Group.
    • 20 Feb 2018
      Owning a home is a milestone that most South Africans aspire to. Becoming a homeowner is a step towards growing personal wealth and owning an asset that appreciates in value over time, provided of course that the correct principles are applied during the buying stage of the process, says Adrian Goslett, Regional Director and CEO of RE/MAX of Southern Africa.
    • 20 Feb 2018
      The suburb of Greenstone in Johannesburg east came to be over the last two decades. “In the beginning, it was literally just a hill with not so much as a shopping centre,” says Michael Levy, Property Consultant at Jawitz Properties Bedfordview. Today it has plenty shopping facilities and is fully built, boasting high-density, upmarket housing and residential estates, though still has a few pockets poised for commercial development.
    • 20 Feb 2018
      A major shift in the ageing paradigm has precipitated an equally dramatic transformation in the retirement sector, with modern accommodation options worlds away from the conventional model.
    • 19 Feb 2018
      Possibly one of the biggest sources of contention between landlords and tenants surrounds the rental deposit. “Most tenants rely on getting their rental deposits back when moving, so that they can use it to pay a deposit on their new home. Having it withheld or even having large amounts deducted can lead to a lot of distress,” explains Bruce Swain, CEO of Leapfrog Property Group.
    • 19 Feb 2018
      Situated approximately halfway between Johannesburg and Pretoria, Midrand was established in 1981 and forms part of the City of Johannesburg Metropolitan Municipality. It has become one of the major business hubs in the country with major pharmaceutical, textile, telecommunication and motoring giants situated within its boundaries.
    • 19 Feb 2018
      The PayProp Rental Index Annual Review of 2017 shows that the rental market suffered from much volatility during the year. It kicked off with rental growth spiking in January with weighted year-on-year growth (YoY) growth peaking at 8.3% before dropping to 6.34% in July, dipping down to less than 5% in November and then experiencing a slight uptick at 5.75% in December.
    • 19 Feb 2018
      While most homes in cluster complexes, estates and other gated communities come with at least one garage or carport, residents would often like additional permanent parking or storage areas for things like trailers, bikes, boats and caravans.
    Subscribe to the MyProperty Newsletter

    Last Name  
    Email Address  
    Email Frequency
    Share this Page

    For Sale Property
    Rental Property
    More Options
    Connect with us