Does fracking reduce house prices?

Final word: Testimony from a Lancashire home owner.

james24

11 August 2014 5:51pm

We live approximately 600 metres from the proposed site in Roseacre Wood and have attended many of the sessions run by Cuadrilla and their very slick PR company. Francis Egan has repeatedly refuted any suggestion that there will be any impact on property values, thats easy when the evidence from the states suggests otherwise and it will not be on his doorstep. We have recently put our property on the market with a fair market valuation, two viewings in 3 weeks and one has already expressed concerns around fracking even though they loved the property. People in Lancashire have genuine concerns around a process that is not properly regulated and we have a Government who does not want to see any regulation to enable this untried industry to get on with it. The UK may have onshore oil wells but they have not employed high volume Hydraulic fracturing as is intended in Lancashire. It is also interesting that when, not that long ago, it was suggested there were large deposits of shale oil in the south east that it was quickly "redacted" to say that it would not be economically viable to pursue the recovery of these valuable deposits, strange how we in the North are expendable and the South East where a number of Conservative ministers live will not be subjected to Fracking. Those who are protesting are doing so not just to protect their rural community but the whole of Lancashire and beyond, it could come to a field next to you in the future. I like many of the others who have posted a comment get very worried when it is thought necessary to redact any report, they cannot argue its in the interests of national security, more like a threat to the Government's plans. If successive government's had maintained investment in the nuclear industry we would not be in the position we are now with regards to energy supply, it's easy pickings for the pro frackers now when they can use the instability in Russia and Ukraine as the ideal reason why our area can be industrialised with well pads. As for the comment that property values can go up and down, we all accept that when its market forces and it's reflected across the UK but when a third party influence is the major factor then such a comment is very ill informed. The Government should publish this report in full and accept there may be consequences, not to do so suggests negative comment that can only do David Cameron's desire to push fracking through at all costs a great deal of harm.

A spokesperson for the Royal Institution of Chartered Surveyors said today that it was too early to predict what effect fracking could have on house prices.

“In terms of the effect of fracking on house prices, activity is still at an early stage and there is limited data on areas directly affected by it, so its effect has not yet emerged. We cannot draw parallels or make conclusions based on the experience of other countries.”

In other fracking news, the Northern Irish environment minister has rejected an application for test fracking on a site in County Fermanagh on the grounds that unauthorised extraction had made it impossible to conduct an environmental impact assessment on the site.

Meanwhile, a group of anti-fracking protesters are gathering near Blackpool for a protest. Adam Vaughan reports for the Guardian:

The Reclaim the Power camp, organised by some of the same campaigners who held the weeks-long protest against fracking in West Sussex last summer, is targeting drilling sites owned by Cuadrilla, the UK’s most high-profile shale explorer.

The protests outside the village of Balcombe last year saw lorries stopped from entering a Cuadrilla drilling site, more than 2,000 people marching and the arrest of Green party MP, Caroline Lucas.

One of the reports cited in the Defra study was conducted in Pennsylvania. Duke University researchers found that there was a small positive effect on house prices for homes who did not rely of local groundwater, so owners were not concerned about the impact contamination might have on their water supply. The positive effect came from the lease payments that US home owners command from drilling companies who drill beneath their homes.

A story in the Duke Chronicle quotes study author Christopher Timmins who “said that houses within the roughly one-mile radius experience an 11 percent property value boost because the fracking utility cannot drill without the homeowners signing a lease. The lease payments and potential economic development add overall value to their homes”.

This highlights a major difference between the US and UK situations. In the UK property owners are due no direct recompense from fracking companies and may soon have their right to stop fracking under their home removed by Tory law makers. The only compensation is the vaguely described £100,000 community benefits package to be paid to local bodies.

The heavily redacted Defra study notes that it is difficult to draw comparisons between the UK and US situations because:

“There is not enough data to disentangle positive impacts (ie lease payments to homeowners living near wells, higher rental prices and other economic activity) from the negative impacts (drilling activity and noise impacts, increased traffic, and air and light pollution); and local impacts that determine the results may not be the same in UK setting.”

Nick Grealy, director of No Hot Air who specialise in managing the perception of the shale gas industry, was unhappy about the earlier post regarding Refracktion who said they had spoken to Lancashire real estate agents who had had difficulty with house sales because of fracking. Grealy pointed out that their sources were unsubstantiated (true). He also gave a counter example of the house prices near Dorset’s Wytch Farm oil field, where house prices remain the highest in the UK outside London.

Both of these examples are anecdotal, but interesting in the context of surveyor Richard Sexton’s comments that high demand areas are unlikely to be affected whereas struggling markets will be more susceptible.

The question used in the United Kingdom Onshore Oil and Gas (UKOOG) poll reported by the BBC today came front-loaded with a large amount of positive information regarding fracking.

“Natural gas from shale is found both onshore and offshore, typically a mile or more underground. For the rest of the survey please answer in relation to onshore shale only. Producing natural gas from shale uses a technique called hydraulic fracturing (often called fracking). This involves creating tiny fractures in the rock deep underground, freeing the gas. Fractures are created by pumping a fluid containing 99.5% water and sand and 0.5% approved non-hazardous chemicals down at high pressure. The British Geological Survey has estimated that the UK has 1,300 trillion cubic feet of natural gas from shale. If just 10% of this could be recovered, it would be enough to meet the UK’s demand for natural gas for nearly 50 years or to heat the UK’s homes for over 100 years. From what you know, do you think the UK should produce natural gas from shale?”

A spokesperson for Lloyds Bank said there has not been any adjustment of their mortgage lending policies to factor in fracking and that the onus would be on the valuer to decide if it affected house prices.

Most major industrial developments such as roads, railways and energy infrastructure do bring down local house prices, says Richard Sexton of chartered surveyor service provider esurv, and fracking is unlikely to be different.

“There’s an initial negative impact on house prices and sentiment but it tends to bounce back,” he says. “There is a relatively low level of understanding about fracking, so there’s a fear factor. In general the population would view it as a negative thing. People don’t like these things going on close to them.”

But he says the effect of development is not uniform and is guided by other factors, including local demand. On the south coast, in areas like Balcombe where large fracking protests have occured, housing demand is consistently high. This makes the market more durable because it reduces the options people have to avoid nearby developments. In areas in the north, such as Preston where an anti-fracking is currently being staged, house prices are less robust. In other words, says Sexton, there will be more homes to choose from so buyers can pick homes that are not in the vicinity of fracking wells.

One of the metrics that might give an indication of how house prices could be affected by fracking is the opposition to drilling in the vicinity of their homes. Carbon Brief have published an aggregation of polling on this subject and it shows the antipathy to nearby developments. This represents the widespread fear that fracking may have aesthetic, health or safety impacts for people who live close to wells. This is the type of impression that could affect home buyers’ choices. It is also one the fracking industry and its advocates within the Tory government are desperate to avoid and avidly contest. These results contrast with the broad (but still mild) public support for fracking in the UK.

The BBC is reporting on polling published by the fracking industry today which indicates that shale gas exploration enjoys the support of more than half of the community.

The BBC says:

A survey carried out by the research group Populus for UK Onshore Oil and Gas (UKOOG) found 57% were in favour.

The poll of 4,000 people found that 16% were opposed, and 27% where undecided about the controversial process.

This industry-research has delivered result which contrast with the independent polling of Nottingham University which found that support had slipped below 50% in May, the third successive drop since last summer.

More reaction from anti-fracking campaigners Refracktion, who say real estate agents in the Lancashire have spoken to them off the record about property prices being affected by fracking activities.

The fracking industry like to claim that it is people publicising the issue of house prices who themselves cause the instability in the housing market. This is a circular argument which confuses the symptoms with the cause. Here in the Fylde there is huge distrust of the fracking companies, the fracking process and now after revelations about declarations of interest last week, of our elected council representatives. Inevitably this leads to genuine concern about local impacts, both environmental and economic, and this concern is then reflected in a lack of confidence in the the local housing market. Would YOU want to live next to a fracking superpad in full spate for 4 years. Even the fracking industry bosses won’t stomach that as you can see here. The relatively tiny community bribes on offer will go no way to compensating people affected by the fracking blight on house prices.