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How do crime rates affect property prices?

Author

Listed:
  • Melek Cigdem-Bayram

    (RMIT)

  • David Prentice

    (Infrastructure Victoria)

Abstract

In this paper we take the first steps to providing parameters capturing the wider impacts of crime when performing cost benefit analysis of investments in justice infrastructure. Specifically, we provide the first set of estimates of the wider impacts of crime for metropolitan Melbourne and regional Victoria. We estimate the effects of two different types of crime on households applying a hedonic regression model to a three year dataset of house prices and characteristics, distances to local amenities and crime rates. We find while an increase in the per capita rate of crime against persons reduces property prices in regional Victoria, it has no such effect in Melbourne. And we find no significant relationship between crimes against property and property prices in either Melbourne or regional Victoria. This implies that when investing in justice infrastructure to deliver services in regional Victoria that are expected to reduce crime against persons, the impact on the broader community (as captured through effects on property prices) should be taken into account in a cost-benefit analysis.

Suggested Citation

  • Melek Cigdem-Bayram & David Prentice, 2018. "How do crime rates affect property prices?," Technical papers 201802, Infrastructure Victoria.
    • Handle: RePEc:inv:tpaper:201802
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    References listed on IDEAS

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    1. Christian Dustmann & Francesco Fasani, 2016. "The Effect of Local Area Crime on Mental Health," Economic Journal, Royal Economic Society, vol. 126(593), pages 978-1017, June.
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    Cited by:

    1. Melek Cigdem-Bayram & David Prentice, 2018. "Responding to high crime rates: what is the mix of prevention, insurance and mitigation individuals choose and its results?," Technical papers 201803, Infrastructure Victoria.
    2. Abebe Hailemariam & Sefa Awaworyi Churchill & Russell Smyth & Kingsley Tetteh Baako, 2021. "Income inequality and housing prices in the very long‐run," Southern Economic Journal, John Wiley & Sons, vol. 88(1), pages 295-321, July.

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    More about this item

    Keywords

    Crime; House Prices; Hedonic Regression; Cost-Benefit Analysis; Australia; Victoria;
    All these keywords.

    JEL classification:

    • C21 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General

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