What impact will the St Albans Sink Hole have on Property Values?

What impact will the St Albans Sink Hole have on Property Values?

Everyone will have heard about the huge sink hole which opened at 1.30am this morning on Fontmell Close in St Albans. The huge hole has led the evacuation of many residents with approximately 40 homes without electric, gas and water, and a rapid response from authorities to assess the damage and fill the hole to restore the foundations of the street.

The big question on everyone’s lips though is how this will affect the residents in the road. Obviously besides the impact to their daily lives and a ‘how long is a piece of string’ answer to any deadline for fixing the hole, the spectre of having potentially lost acres of equity in their home has the capacity to leave some owners sick to the stomach with worry.

Several sink holes have carved gaping holes in the ground across the country in recent years, leaving many scratching their heads and asking questions about why houses were built on such sites in the first place. The geological history of this part of St Albans shows that many areas in and around St Albans were extensively used to mine sand, gravel and clay – this area notably being used for many years as a brickworks where the brickmakers dug huge ‘bowls’ to mine the clay for bricks from the soil. This mining activity (which was later filled in) and bedrock instability due to acidic groundwater eroding the limestone bedrock could be a contributing factor to the potential for more sinkholes across the Bernards Heath area including Seymour Road, Beech Road, Marshall Avenue, Watson Road and the land underneath local amenities such as The Pioneer Skate Park and two local schools.

Pretty much every other article you can find on the sink hole will tell you where it is, how big it is, how it formed, what caused it and the science behind sink holes. Though I may know a little about sink holes, I won’t tout myself as an expert on that front – best to ask a geologist.

The main focus of this piece is the impact on pricing.  So, is it going to affect house prices?  Well, if I told you that a house right next door to a sink hole will be worth the same today as it was yesterday before it appeared, would you call me a liar?  Probably.

And would you buy it? Probably not.

That’s addressed the question of perceived value, so yes – arguably there will be less buyers interested than there were before, which means that values may potentially drop on that road. The other factor to take into account however is the repair methods employed in rectifying the damage caused by a sink hole.  Many are fixed using foamed concrete to allow water to pass through into the limestone bedrock whilst reinstating a solid foundation for construction of buildings, roads and infrastructure on top. This is the method that was used in Hemel Hempstead last year.

The problem, as far as I can see, is that nobody really knows where the eroded caves in the bedrock actually are, and therefore we have no current method of predicting where the next sinkhole will appear.

This sounds like scaremongering – and while I’m not a statistician (I can barely even say statistician without a lie down afterwards) – and although there HAVE been incidents where properties in the area have suffered from subsidence, and indeed one sinkhole opened up behind the Pioneer Club which has been monitored by the council for some time, I should imagine that the probability of another sink hole opening up right underneath your house or your child’s school is low. Many of these buildings have been here for quite some time without any major incident, so I shouldn’t be too concerned.

The best and most recent case study of how this geological nightmare can impact on housing is with the sinkhole which appeared in February 2014 underneath Oatridge Close in Hemel Hempstead. In March, a local agent was selling a 4 bed property on that road just feet from the hole for £420,000 which is in line with asking prices at the time, if a little under the norm, but many of the properties on that road belong to Hightown Praetorian and Churches Housing Association, with many of the flats being shared ownership. What is really encouraging is that sales haven’t slowed down by a huge amount, and the prices seem to have retained a somewhat positive trend, which contrasts the expectation that suddenly all prices on that road would plummet into the hole as well.

Some properties on the site did require demolition and have been replaced by town houses on newly replaced foundations. Many mains connected services called for extensive works to be put in place to support any future building work, but this to me just highlights the need for an extremely robust buildings insurance policy which covers residents in the area for such eventualities, particularly if you know about the possibility of sinkholes or geological activity.

All of this does raise the question of whether issues that have a geological or structural impact, whether a present factor or a calculated risk, have as much of an impact as social problems such as poor schools, high crime rates and lack of community – it seems that the latter drag prices down at a much higher rate than the former.

I any event the ultimate price the owners and residents of Fontmell Close will pay will be determined by the buyers who look to own homes on the road in the future. The biggest factor to bear is ensuring that any remedial works and geological surveys are carried out and the paperwork is retained by the owners to pass on to buyers in the interests of transparency and cementing trust.

Under the new Consumer Protection Regulations the concealment of a sinkhole nearby could give rise to a lawsuit from the buyers (assuming they somehow manage to not hear about it on the news, which would be a miracle in itself) if it was later proved that the agent and the owner had omitted this information from the sales particulars – the principle of caveat emptor (buyer beware) is not as much of a solid foundation as it once was, if you’ll excuse the pun.

Roundly speaking, homes directly on the rim of the crater may experience some depreciation, but on the whole the impact will be minor due to the huge demand for St Albans property and the massive national demand for housing. I advise that owners ensure that buyers are confident in the steps taken to rectify the problem, and that some assurance can be given to them on ensuring the property is not at risk. The best way to do this is through producing paperwork from the council and specialist contractors concerning the work undertaken to plug the hole.

Undoubtedly, some buyers will run a mile, but in a market where demand outstrips supply to such a degree that open days can attract tens of buyers, an upfront approach and a realistic but keen price will see vendors walking away without too much of a limp.

UPDATE EDIT: 01/10/15 19:28 GMT. Credit to Andy Kilvington for offering extensive local knowledge on previous issues with the area which was not reported in the press.