How badly does murder affect the value of your property?
As The Block puts its next set of contestants into a former crime scene, we look into how much difference murder makes when you're trying to sell your house.
It's not surprising that Channel 9's production company has once again chosen South Yarra for the next series of The Block. As a prime investment hub, South Yarra is within close proximity to a number of amenities and services a dream location for residential and commercial developers alike, as well as local and offshore investors. Several previous series of The Block have also filmed there, which we're guessing makes negotiating with the local council a lot easier.
What baffles us a little is the choice of the building itself because Hotel Saville, this year's octagon-shaped venue, is a former crime scene. The building was purchased by Channel 9's production company for $7.35 million for the eleventh series of the show, Blocktagon, scheduled to begin September 6 2015.
REAL ESTATE LESSONS FROM THE BLOCK
Described as the "ugly duckling" of South Yarra, the eight-level Hotel Saville has a few skeletons in the closet. The eerie building was location of a gruesome event that took place in 2002, where a 30-year-old woman was allegedly raped and mutilated by self-proclaimed 200-year-old vampire and male prostitute Shane Chartres-Abbott, who was shot dead moments later.
That's unpleasant, but will it affect the final value of units sold there? The most recent research on this topic in Australia comes from NSW, so let's look at what it found.
How does murder impact property prices?
Research in 2014 by the University of Technology Sydney (UTS) Economics Discipline Group of the Business School explored the impact that a murder can have on property values in the first year after an incident.
The study found that house prices generally fall by 3.9% for properties located within 0.3 kilometres from a murder location, in the year following the murder. Interestingly, there's a similar fall if sex offenders have lived in the area.
That means that if a $504,000 property 300 metres down the road from a murder tries to sell within 12 months of the killing, its value is likely to fall by $19,600.
Properties where a murder has been committed will sell at a discounted rate due to psychological distress experienced by nearby residents. This drastically reduces the desirability of the area as it will be considered to have a higher crime rate and a lower degree of safety and security.
Does media coverage of a murder affect property prices?
Unnatural deaths, such as murder, are generally revealed to the public through media coverage of police investigations but does the extent of the media coverage of a murder impact the change in property price?
You would imagine that a higher degree of coverage would lead to greater price falls, but the difference isn't massive. The study found that homes between 0.2 kilometres and 0.3 kilometres of a murder with high media coverage experience only a drop in of about 0.5% in the year following the murder -- higher than 0.3%, but not by an enormous amount.
This may be because highly-publicised murders can lead an increased police presence and efforts to reduce crime in the area, which can increase the value of property in the region over time.
MURDER IN SYDNEY
According to the NSW Bureau of Crime Statistics and Research (BOCSAR), Sydney has experienced a slight reduction in murder rates in the last decade, from 1.62 per 100,000 individuals in 2003 to 1.02 per 100,000 individuals in 2008. On average, the murder rate in Sydney is 1.31 per 100,000 people.
- The most common type of murder is stabbing, which accounts for 42.5% of murders in NSW.
- Shootings attract more media coverage compared to stabbing.
- A home is the most common place for a murder to take place, representing 57% of all murders in NSW.
- Sale prices for homes within 0.1 miles from a murder location are 6.7% lower than those of homes located between 0.2 and 0.3 miles from a murder location.
Will an agent tell you about a murder?
Since 2004, state legislation requires real estate agents to communicate to a potential buyer if a murder has occurred in the property. However, legislation does not require real estate agents to disclose information on nearby murders or suicides in surrounding neighbourhoods. Interestingly, there are even fewer disclosure requirements for rental agreements, so rental tenants may be more vulnerable to a lack of accurate information.
Despite the rules, murders are not always disclosed by agents or property managers, so it's important that you research the property and area thoroughly for yourself. Speak with neighbours or existing residents, keep an eye on local media so that you're aware of any undesirable incidents, and do some Google research on levels of crime within the suburb.
Picture: Google Street View