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Housing in high-crime areas across Sydney and Melbourne are outperforming the property market over time, according to Pete Wargent, co-founder of BuyersBuyers.com.au.

Mr Wargent said “despite the stigma that’s typically attached to areas with crime issues, and the potential challenges that go with that over the short term, over a reasonable timeframe this has tended to be outweighed by the combined benefits of affordability, convenience of location, and gentrification, from a housing market performance perspective”.

“Of course, it doesn’t follow that we see buyers actively seeking out crime hotspots, but our experience - and now the actual research figures - show that these other factors tend to be bigger drivers of housing prices over time” Mr Wargent said.

The research house Riskwise Property Research has identified high-crime areas were trumping their perceived safer neighbouring suburbs, when comparing their five-year growth to the city’s median.

RiskWise CEO Doron Peleg said land scarcity and undersupply of houses in the two capital cities had created strong demand even in higher-crime areas, with affordability being the key driver for house price increases.

For units, on the other hand, there are major differences between our capital cities, with Sydney delivering stronger results.

However, units in high crime areas of Melbourne have underperformed the market.

Mr Wargent of BuyersBuyers.com.au said “the ample supply of units in popular areas over Melbourne over this recent construction cycle has kept entry prices relatively affordable, and generally speaking apartment buyers have not needed to compromise so much by moving to high crime areas.

Houses undersupply and land scarcity deliver strong results

In Sydney, the 10-year capital growth rates for houses in all 10 high-crime suburbs analysed by Riskwise materially outperformed the Greater Sydney growth rate, with the weakest performer (Granville) still outperforming the wider market median price growth by 7 per cent.  (see fig1) 

Sydney has a clear trend that these suburbs are all in the western part of the city, and only within the three SA4 areas of Parramatta, South West and Inner South West which all enjoy good access to the CBD and have affordable prices. This is due to a long-term trend of expansion, first to the Inner West with major price increases, and then further out. This phenomenon is more widespread in Melbourne meaning there is no clear trend of areas affected.

 

However, the results were similar in Melbourne for houses where the 10-year capital growth rates in eight high-crime suburbs outperformed the Greater Melbourne growth rate. While two other suburbs slightly underperformed, they still showed strong capital growth. (See fig2)

Units – a tale of two cities

“In Sydney the 10-year capital growth rates in six (of the eight areas where valid data was available) high-crime suburbs materially outperformed the Greater Sydney growth rate. Granville performed just above the market while Guildford slightly underperformed but still showed strong capital growth,” he said.

“While Sydney’s median unit prices are materially higher than Melbourne ($761,792 in Sydney vs $575,009 in Melbourne), units in high-crime areas are still relatively affordable compared to other areas in Sydney.”  (see fig 3)

 

In Melbourne, due to a major oversupply of units with good access to the CBD, five out of seven high-crime suburbs that had valid data underperformed the Greater Melbourne growth rate.

 

“Unit oversupply across large areas in Melbourne make units affordable and consequently property buyers don’t need to compromise and buy units in high-crime areas,” he said. (See fig 4) 

Mr Wargent of BuyersBuyers.com.au said most property investors believed high-crime rates would have a detrimental effect on property price growth, but it was apparent the opposite was often true.

“Investors commonly attribute too much weight to crime figures or perceived problem locations, and should more objectively analyse the financial risks when making property investment decisions,” he said.

 

Mr Peleg of Riskwise said “our nationwide research actually found gentrifying suburbs with high crime typically deliver strong price growth and outperform the local benchmark. This is also consistent with the international trend where areas that had been notorious enjoyed gentrification and major price increases.

 

“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 severely unaffordable.”

 

Mr Peleg said investors should more objectively analyse the financial risks when making property investment decisions.

 

For all media enquiries, contact BuyersBuyers.com.au Media Manager Tatiana Marchant on 0410 655020 or email tatiana@buyersbuyers.com.au

 

Visit www.buyersbuyers.com.au/weintelligence

ENDS

About BuyersBuyers.com.au

BuyersBuyers.com.au is a national marketplace offering affordable buyer’s agency services to all Australians. Our ‘best in class’ nationwide panel of expert agents gives every Aussie a fair go in the housing market by reducing time, cost and stress through the property buying process. All data referred to is sourced and verified by independent research house Riskwise Property.