Expert Bust #17 - Public Housing Is No Big Deal

A lot of "experts" suggest investors steer clear of public housing. But historical data suggests it's no big deal...



The scatter plot shows a red dot for each suburb in 2012 that had a known percentage of government housing. Some had very little (left) while others had a lot (right).

In the 5 years that followed 2012, some suburbs had high growth (top). Others had low growth (bottom).

If there is a relationship, we'd expect to see the scattering of red dots start at the top left and go down to the bottom right. It's hard to tell from the scattered red dots, so I've plotted a line of best fit. It does slope gradually down from left to right. This suggests there might actually be a mild relationship. But it's too flat to be considered statistically significant. The slope might be caused by inherent error in the means by which capital growth is measured.

The vast majority of suburbs have less than 10% government housing. Most suburbs have no govt housing. The difference in capital growth rate from one extreme to the other is insignificant.

Even a change in govt housing doesn't help...



This chart shows the relationship between change in govt housing from 2006 to 2011 and the capital growth rate for the following 5 years. The trend line is almost dead flat.

There's nothing in this that investors can use to improve growth prospects. Sometimes it's easier to blurt out an opinion or have a wild guess than it is to do the research and know.

 

Oh yeah. Look at Brunswick, Flemington, Ascot Vale, Moonee Ponds, Port Melbourne, all chock full of active high density public housing and it’s never hampered growth.

As a matter of fact, look at Moonee Ponds vs Essendon. Roughly equivalent suburbs, same demographics, same type of homes, only difference is that Essendon has almost no public housing whereas Moonee Ponds is chock full of it. Essendon’s home prices are only marginally higher.

 

We have had an interesting scenario in Perth where government rezoned land in public housing areas. It drove prices north.
I have purchased in public housing areas in Perth and Melb, I dont care, as long as ot makes sense

 

Yes. I regret not buying in a dual school zone called Brentwood 15 years earlier when it was full of public housing and run down huts.

 

Love seeing this data, great visualisation

 

@datageek- What about public housing clusters within a suburb that has low public housing.

If a suburb has 2% public housing, but a pocket of that suburb has 16%, should that pocket be avoided as thats where the high concentration of public housing is within the suburb?

 

If you can get over the stigma you will open opportunities

 

I've got nothing against it, would happily live there.
But when you drive up the street and see almost a third of houses with cars on the front lawn, run down, overgrown- makes me think it would be undesirable when selling, and could cause issues for tenants.

 

If the pockets have been the same as they always have for a long time (e.g. a decade or more), then the detriment of proximity to them is likely already factored into the prices and rents of nearby properties.

Consider proximity of eye-sores and no-go-zones in establishing current price/rent. But it's largely irrelevant for future growth, especially long-term.

There is a case where it's actually beneficial long-term. State housing may choose to sell off some assets if the area has had decent growth. Then they buy cheaper replacements elsewhere.

Once the "housos" have been relocated, the area may appear more attractive, resulting in faster growth rates. This is only short-term though until the benefit has once again been factored into prices.

 

Yep fair enough. How likely or how often do they sell off these houses?
It is hard to ignore the eyesore houses and clear lack of care in the street compared to surrounding streets.
I think in this market, people are just being stupid and paying top dollar regardless of where the house is located in the suburb, so I might have to walk away anyway.

 

Not very often unfortunately. I think the NSW housing commission sold off some stock in The Rocks only a few years ago. They would have been holding those for many decades.

I wouldn't buy near state housing purely on the speculation of nabbing a windfall in the future once they sell up. But if you hear of them selling up, that might be an opportunity.

 

Look at Ashburton. Townhouses on 250m2 selling for $1.8m sitting next door to 1940s estates that imo need to be rebuilt because they're no longer fit for purpose.

 

At a suburb level it might have minimal impact but how about at a street level? There are some streets directly next to public housing unit blocks in Newcastle that I wouldn't touch with a 10-ft pole.

 

Analysis at street level is difficult due to small sample sizes which make growth calcs unreliable.

But the general pattern should show through at suburb level since there are some suburbs with a higher proportion of state housing than others.

But I must admit, I have not researched "quality" of state housing. There may be a nuanced pattern that contradicts the general pattern when considering the "10ft pole" type quality of social housing.

 

affordability comes into play big time…… and rising markets

Whatever makes money works well

would you believe Cooloongup is hot property 21% growth in 12 months, and continuing.

 

I know you're joking around but the '10 ft pole' factor is of course drawing comparison to overall OO demand. Take for example Hamilton South
Suburb Research | Picki

The median sales price in the public housing pocket is about 50% lower than the pockets without. The graph says 'Houses Only' but I am not sure how reliable that is.

I know this area I live nearby, I can tell you that anyone that lives in the Newcastle area will know pockets like these, Mayfield, Jesmond etc have quite dodgy areas that home buyers will avoid. By the same token there are amazing streets in Mayfield, Broadmeadow with million dollar mansions saught after by many.

Now is the capital growth in the long term, the same for these sorts of streets? I don't know, does the data show it does? It's hard to imagine there would be owner occupiers bidding up the price for one of the houses directly opposite or next to one of these public housing unit blocks.