The impact of crime on apartment prices in Hamburg, Germany

Abstract

Purpose The purpose of this study is to examine the impact of crime on apartment prices for Hamburg, Germany, for the years 2012 to 2017. Design/methodology/approach The authors use a panel data setting with fixed effects estimators and temporal lags to moderate the endogeneity concerns related to crime. The authors consider the effect of total crime, violent and property crime and some sub-categories of crime. Findings The estimates show that it takes two to three years for prices to react, with the longer run elasticity reaching −0.12 for total crime, −0.15 for property crime and −0.06 for violent crime. The elasticities are much larger in high-crime areas (−0.22 for total crime, −0.28 and −0.09 for property and violent crime) and elevated also in low-income areas. Social implications The finding that property crime matters more in terms of quantitative impact for housing values than violent crime provides reasonable grounds for rethinking the resource allocation of public spending on crime clearance and prevention in Germany. Far more emphasis on preventing property crime appears in order and especially so in the lower income or higher crime areas, which are significantly more affected by crime and in particular property crime than those in high income or low crime areas. Originality/value The estimates for Hamburg provide the first detailed results of the impact of crime on real estate prices in Germany. It is also the first study for Continental Europe using panel data.