Challenging the idyll: Does crime affect property prices in small towns ?

1. Challenging the idyll: Does crime affect property prices in small towns? Vania Ceccato and Mats Wilhelmsson

2. Introduction • There is no novelty in saying that crime concentrates in urban environments. • Rural municipalities are often regarded as idyllic safe places; a retreat from the problems of big cities, including crime. • The problem is that far too often low crime rates in rural areas are taken as a sign of there being ‘no problem’, or that, just because fewer offences occur, crime does not affect people living there.

3. Literature review

4. Aim • The aim of this study is to assess whether crime, particularly burglary, affects property prices in a rural municipality.

5. Case study: Jönköping • The municipality has a housing market that is sufficiently large to allow a hedonic analysis of the impact of safety on property prices. • Although Jönköping can be classified as a middle large municipality in terms of total population in Sweden, with an important university, it is located geographically isolated from the three main urban Swedish centers: Stockholm, Gothenburg and Malmö. • The municipality has excellent transport communications but it is relatively distant from the main national urban centers. • In terms of safety, the number of reported crimes per 1000 inhabitants in Jönköping is lower than the national average, a typical characteristic of rural municipalities in Sweden.

7. Figure 2 – Offences per 100,000 inhabitants, Sweden total, Jönköping total, theft and violence rates. Data source, BRÅ (2013).

8. Hedonic modelling • Hedonic price modelling is traditionally used to assess property values and one’s willingness to pay for the property. • The price of a property reflects attributes associated with it, which can be of two types: • those related to the property itself and • those related to the environment in which the property is located. • Controlling: spatial dependency, endogeneity, outliers

9. Hypotheses • Residential burglary negatively impacts apartment prices after controlling for attributes of the property and neighborhood characteristics. • Residential burglary affects different market segments differently. Residential burglary will have a stronger negative effect on high-priced apartments regardless of year. • The effect of residential burglary on property prices varies over time. Property prices will be more negatively affected in areas that show higher increases in crime rates (changes).

10. Data • The estimation of the hedonic equation in this article is based on two cross-sectional data sets that include arm’s-length transactions of apartment sales in co-operative housing societies. • Using Geographical Information Systems (GIS), the apartment sales data have been merged together with land use, demographic and socio-economic data from Jönköping’s City planning office. • Crime data for 2005 and 2011 were provided by the Jönköping Police and contained the coordinates of each address.

11. Results (2011)

12. Robust results (2011)

13. Conclusion • Residential burglary negatively impacts apartment prices after controlling for attributes of the property and neighborhood characteristics. • Findings show that residential burglary has a significant negative effect on property prices in Jönköping in 2011

14. Conclusion • Residential burglary affects different market segments differently. Residential burglary will have a stronger negative effect on high-priced apartments regardless of year. • The variable ‘burglary rates’ is slightly more significant in for upper quantile prices than for lower or mid quantiles.

15. Conclusion • The effect of residential burglary on property prices varies over time. Property prices will be more negatively affected in areas that show higher increases in crime rates. • The models based on change in crime rate as an explanatory variable produce a poor goodness of fit, the hypothesis of effect of residential burglary on property prices over time was only partially tested.