Crime Areas Shine On Price Growth

Posted on 28/02/2018  
Crime Areas Shine On Price Growth

New research has refuted one of the most common beliefs in real estate – that areas with high crime rates have inferior capital growth.

It shows that affordable areas attract strong demand, generating above-average price growth, regardless of the local crime statistics. This is particularly so if a cheaper area is undergoing gentrification.

According to RiskWise Property Research, housing in high-crime areas across Australia is outperforming the general property market. This correlates with Hotspotting analysis which shows that low-priced locations, including those stigmatised as “problem” areas, often have strong capital growth.

“The research house discovered high-crime areas, despite expectations, are trumping their safer neighbouring suburbs when comparing their five-year growth to the city’s median,” says RiskWise CEO Doron Peleg.

“Most property investors believe high-crime rates have a detrimental effect on property price growth, but its apparent the opposite is true.”

Peleg says investors commonly attribute too much weight to crime figures and should more objectively analyse the financial risks when making property investment decisions. 

“Our nationwide research actually found gentrifying suburbs with high crime typically deliver strong price growth and outperform the local benchmark. 

“We found affordable high-crime areas with significant gentrification are likely to produce strong price growth, particularly when dwelling prices in the inner and middle rings are sunaffordable.” 

In Melbourne, while price growth for houses was similar to the benchmark, some suburbs significantly outperformed the market. Frankston North, a notable downmarket suburb in the far south-east, delivered growth of 102% over the past five years. 

“Our research shows that suburbs like Frankston North are not outliers and similar results can be found in each of the major cities,” Peleg says. 

“Busby in the western suburbs of Sydney is another example. This suburb consistently endured some of the highest gun violence rates across the city, yet it delivered growth above the median for Greater Sydney.” 

In Sydney, eight of the Top 10 high-crime areas outperformed the market due to very strong demand from owner-occupiers and investors for affordable properties. 

“Together, these high-crime Sydney suburbs delivered outstanding five-year growth of 87% for houses and 65% for units, outperforming the Sydney price growth benchmark,” he says. 

“Brisbane and Gold Coast high-crime areas also typically outperformed the market.” 

While price growth in Adelaide and Perth was below the local benchmark, high-crime areas undergoing significant gentrification delivered strong growth. For example, Prospect in Adelaide outperformed the local housing market with 26% median price increase over the past five years. 

 “In summary, our research found affordable high-crime areas with significant gentrification are likely to produce strong median price growth - whereas suburbs with high-crime and low-gentrification typically deliver growth below the city benchmark, such as in Osbourne Park in Perth,” Peleg says. 

 

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