Does a Nearby Murder Affect Housing Prices and Rents? The Case of Sydney

Abstract

We measure the impact of murders on prices and rents of homes in Sydney. We find that housing prices fall by 3.9 per cent for homes within 0.2 miles of the murder in the year following the murder, and weaker results in the second year after a murder. We do not find any effects of murders on rents. Higher media coverage and being located closer to the murder (within 0.1 mile) have no additional effect on prices. Taken together, our findings suggest that proximity to a murder affects nearby property prices, particularly in the first year after the incident.

How Do Crime Rates Affect Property Prices?

“…This is also found for Abelson et al . (), Ceccato and Wilhelmsson () and Klimova and Lee (). But if both crime rates are included in the regression for Melbourne, the coefficient on the current rate of crime against persons is statistically insignificantly different from zero.…”

“…When several types of crimes are included simultaneously in the hedonic regression, significant negative effects are found for Miami (Ihlanfeldt & Mayock, 2010) and all of England and Wales (Braakmann, 2017). The two Australian studies, which solely consider violent crime, also find significant negative effects (Abelson et al, 2013;Klimova & Lee, 2014). McIlhatton et al (2016) find no significant effect of violent crime in Belfast, Northern Ireland when considered simultaneously with other types of crime, but they do find a significant negative effect when violent crime is considered in isolation.…”

“…When several types of crimes are included simultaneously in the hedonic regression, significant negative effects are found for Miami (Ihlanfeldt & Mayock, ) and all of England and Wales (Braakmann, ). The two Australian studies, which solely consider violent crime, also find significant negative effects (Abelson et al ., ; Klimova & Lee, ). McIlhatton et al .…”

“…The most popular approach to deal with endogeneity in this literature is to use IVs. The only exceptions are Klimova and Lee (), who apply a quasi‐experimental approach, and Braakmann (), who relies on extensive area controls to achieve identification. Second, different choices are made about the standard errors.…”

“…One way to estimate the local impacts of negative externalities is through their effects on property prices using a hedonic regression (Palmquist, 2005). There is a substantial international literature applying hedonic regressions to estimate the impact of crime, but the Australian literature solely focuses on Sydney in the early 2000s (Abelson et al, 2013;Klimova & Lee, 2014). This paper reports the first set of estimates of the wider impacts of crime for Melbourne and regional Victoria.…”