High-crime property hotspots outperform capital cities

While many investors may think high crime would result in underperforming growth rates, RiskWise’s CEO Doron Peleg said that crime is not the only risk factor when considering a property purchase.

“Investors commonly attribute too much weight to crime figures and should more objectively analyse the financial risks when making property investment decisions,” Mr Peleg said.

“Our nationwide research actually found gentrifying suburbs with high crime typically deliver strong price growth and outperform the local benchmark.

“In summary, our research found affordable high-crime areas with significant gentrification are likely to produce strong median price growth. Whereas suburbs with high crime and low gentrification typically deliver growth below the city benchmark.”

Simon Pressley, head of market research at Propertyology, said some investors may look at high crime statistics and disregard suburbs without considering the needs of housing in the area.

“While it’s true that there can be pockets within any city that are known to have higher levels of crime than others, I do think that some investors can exaggerate the perceived impact [it] might have on future property prices,” Mr Pressley said.

“The question is whether there’ll be sufficient demand for people to want to live in the area for a prolonged period of time, as opposed to whether you would live there yourself.

“One needs to consider how bad the crime is (petty theft and vandalism is different to assault and drug trafficking) and whether we’re talking about a few well-known houses within a community versus entire suburbs being deeply ingrained in crime for decades.”

High-crime associated suburbs in Sydney experienced medians of 87 per cent growth for houses and 65 per cent growth in suburbs, while the capital city saw a rise of 81 per cent and 60 per cent, respectively.

Busby stood out as a key example to Mr Peleg, experiencing growth above Sydney while also having “some of the highest gun violence rates across the city”, with eight of the top 10 high-crime suburbs in the Sydney area outperforming the market.

“Together, these high-crime Sydney suburbs delivered outstanding five-year growth of 87 per cent for houses and 65 per cent for units, outperforming the Sydney price growth benchmark,” Mr Peleg said.

Douglas Driscoll, CEO of real estate group Starr Partners, told Smart Property Investment while he was surprised about its growth, he could see how the area was primed for growth.

“It's a good area, it's very popular. Obviously, it's part of that burgeoning south-west corridor. We're seeing better connectivity in terms of transport, infrastructure. You obviously got Badgerys Creek being built close-by, which itself is going to create ample opportunity,” he said.

“A lot of these bigger detached homes have been built in the last five years, obviously, which means the median price has increased partly because of that.”

Following Busby are:

• Bankstown at 92 per cent growth for houses
• Guildford and Liverpool at 90 per cent growth for houses, and 54 per cent and 76 per cent growth respectively for units
• Auburn at 88 per cent growth for houses and 63 per cent for units
• Greenacre and Granville at 86 per cent growth for houses, and 57 per cent and 66 per cent respectively for units
• Punchbowl at 84 per cent growth for houses and 60 per cent growth for units
• Merrylands at 80 per cent growth for houses and 65 per cent for units
• Greenfield Park at 72 per cent growth for houses and 68 per cent for units

Queensland was another state that saw high crime suburbs outgrow the average of the capital city, with 32 per cent for houses and 12 per cent in units, while a drop down to 22 per cent and 9 per cent respectively was seen in Brisbane.

The highest performers were Robertson and Runcorn at nearly double the Brisbane median at 41 per cent growth for houses and 17 per cent and 9 per cent growth respectively for units.

Following these suburbs were:

• MacGregor at 40 per cent growth for houses and 12 per cent for units
• Sunnybank at 38 per cent growth for houses and 19 per cent growth for units
• Sunnybank Hills at 36 per cent growth for houses and 14 per cent growth for units
• Woodridge at 28 per cent growth for houses and 11 per cent for units
• Inala at 26 per cent growth for houses and 19 per cent for units
• Deception Bay at 25 per cent growth for houses and 6 per cent for units
• Forest Lake at 20 per cent growth for houses and 8 per cent for units
• Eagleby at 17 per cent growth for houses and a decline of 5 per cent for units

However, not everyone sees Robertson and Runcorn as high-performing areas. 

“Propertyology does not regard Robertson and Runcorn as property hotspots – far from it. That said, we think it would be unfair on the many good citizens of that community to blacklist the demographic as ‘high crime’”, Mr Pressley said.

Not all capital cities saw this trend, however, with high-crime suburbs growing at a slower rate in Adelaide. High-crime suburbs grew at a rate of 16 per cent for houses and 8 per cent for units, while the capital city area rose 19 per cent and 15 per cent, respectively.

Despite this, Prospect was identified by RiskWise as a high-crime area with 26 per cent median growth over the last five years due to increased gentrification.

Gregg Harris, NAB’s South Australian general manager, said that Prospect has been long underrated, and has come to the forefront with a steady flow of commercial developments fuelling back into residential property growth.

“A number of high-profile commercial developments have recently been completed in Prospect, including the opening of new restaurants and a cinema complex, which has helped modernise the suburb and increase property interest. New supermarkets and shopping complexes have also been announced,” Mr Harris said.

“Low-maintenance apartments and townhouses are being developed in Prospect as an alternative to the larger three and four-bedroom homes.

“Adelaide’s CBD is a mere 2.5km which makes Prospect an attractive suburb for city workers and those wanting the city’s lifestyle but a more generously proportioned property.”