Is a fall in Property Values a Social Impact?
One of the key issues that upsets people when development proposals are made is the potential impact on property values. Regardless of the general rising trend in property values (in the long term of course, not recently), many people are convinced that a development proposal will ruin their property values and hence destroy their financial security. Why is this? And if it is a serious issue, why is it not a consideration in urban planning?

When planning new developments, particularly of infrastructure, the potential impact on property values is not considered to be a relevant planning consideration (in Australia anyway). There are a number of reasons for this, which include:
- The uncertainty of the exact impact – will the proposed development increase or decrease the other property’s value over time? What happens if it actually adds value to a property – should the landowner pay a betterment tax to the developer?
- If the development is of community infrastructure, then there is an argument that the broader social good is more important than the localised negative impact (more about this in another post sometime).

Property values are highly subjective. One man’s mansion is another man’s doghouse. People consider a wide range of issues when deciding how much they will pay for a particular property. The article below has some classic examples of the trade-offs people are prepared to make in home purpose decisions.

The Unfortunate Location – The New York Times
http://www.nytimes.com/2009/06/18/garden/18houses.html?pagewanted=1&_r=1&ref=style

Generally there will always be people who are willing to buy a property in a poor location if there is a financial trade-off. This of course is the crux of the issue for someone who loses believes they have lost value on their home. However, if you were to look at the value of a property over an extended period, you would almost always find that the value had increased. As with almost any asset, it’s the point at which you buy and sell that makes the difference. Once a new infrastructure element is in place, and people have become habituated to it, it becomes part of the background and its negative impacts on property values decreases.

This of course is no consolation for someone who can demonstrate a loss in value. This has happened on a few projects I have worked on. In one case, a couple had their house on the market, and a purchaser had made a firm offer for the property. The following day the purchaser learned of the infrastructure proposal (which was actually going to be several kilometres away and barely visible from the property in question). They withdrew their offer. The following day they made a second offer which was a few tens of thousands less than the original offer. When I spoke with the vendors they were quite distraught over the whole incident. I personally would have told the potential purchasers that they were unethical ratbags and I wouldn’t sell them a lollipop, but the vendors had other reasons for needing to sell the property.

This impact on people’s perception of property values is usually most acutely felt at the planning stages. It comes about from the uncertainty caused by the proposal, when people can’t visualise what it will look like and what impact it will have on their daily lives. The general response is to assume the maximum negative impact. As I mentioned earlier, once the construction period is over and people can clearly see what the actual impact is – and see the benefits of the infrastructure – property values stabilise.

The impact on property values caused by some major development proposals is a significant social impact, even though it is generally short-lived. The emotional stress that some local communities experience is quite considerable. Individuals have reported significant physical and mental health impacts, marriage breakdowns, job losses and their children being affected (usually from being required to move).

For those of us who work in these kinds of planning studies, this means that managing expectations through the planning and construction phases of a project is vital to minimise the negative impacts for local communities.