The Effect of Neighbourhood Enclosure on Property Values

Abstract

Spiralling violent crime in South Africa has led to the increased use of access control to restrict access to suburbs and thus make it more difficult to perpetrate violent crime against residents. This neighbourhood enclosure normally takes the form of booms, palisade fences and security guards to close off entire suburbs that were once or still are public property. This study examines the effect of the implementation of neighbourhood enclosure on property values. The primary methodology used to research this concentrated on the analysis of residential property values, bond approvals and relative amounts of property transferred within the period of late 2002 and mid 2004. Analysis was based on information available at the deed’s office. Limitations included the small sample size and the availability of information. Applicants for suburban closures can use the results of the study to verify or discredit claims of property value increases. Municipalities can match property values to services and rates. Results showed that property values that were found to be either similar in adjacent open and enclosed areas or more expensive in enclosed areas. The latter trend was evident in higher value properties. This illustrates a higher demand for properties in these enclosed areas than in the adjacent open areas. Further analysis of prices showed that, in all cases over the same period, prices increased by more in enclosed areas than in open areas. This statistic proves the hypothesis, that neighbourhood enclosure increases the value of properties within the enclosure when compared to similar properties in adjacent open areas. Analysis of the value of bonds granted in an area showed that banks appear to ignore the enclosure status of the immediate area.