14/12/2004

Researchers at the London School of Economics say crime affects house prices just the same as school league tables do, but burglary is an 'unobserved' crime and so does not affect prices.

A report in the Economic Journal suggests that observable crimes such as graffiti and vandalism have a significant effect on prices and London home buyers could pay a 1.7% premium for a home where such crimes were 10% less than the average.

The author of the report, Dr Steve Gibbons explains that vandalism, graffiti and other forms of criminal damage motivate fear of crime in the community and may be taken as signals or symptoms of community instability and neighbourhood deterioration in general.

But burglaries have no measurable impact on prices, even after adjusting the calculations for the potential dependence of burglary rates on property characteristics that may not be fully understood by the researchers. Dr Gibbons believes this is because people don't see burglaries being committed and don't take them into their subconscious calculations about the quality of the area.

Pubs and wine bars also have a skewed effect on property prices. Near to bars, where brawls may be observed, property prices are depressed. But the rate of crime falls off at 3.5 crimes per km2 per year as distance to the nearest pub increases, so that pretty soon the positive desire for wine bars and pubs 'reasonably' near home cancels the effect. In fact having as many as ten pubs or wine bars per square kilometre can boost property prices by 2.8%.