How Much Would You Pay To Escape Australia’s COVID ‘Ring of Steel’?

Although we all understand that freedom doesn’t come free, its true price remains a mystery.

Three Australian researchers have found that this is no longer true. They have compared changes in rents and home prices in areas affected by the country’s most severe pandemic lockdown. This has allowed them to estimate how much they are willing to forgo liberty.

The government of Victoria, Australia ordered all businesses to shut down and residents to take refuge in their houses starting in March 2020.

These restrictions were removed in June. The Victorian government then imposed a lockdown regime with one crucial distinction in response to the second COVID-19 wave.

Metropolitan Melbourne, which is the largest city in the state, imposed strict Stage 4 restrictions. These restricted virtually all social activities. Even more than 5 km from one’s home was prohibited.

The areas of the state located outside this boundary—which public officials called the eyebrow-raising “Ring of Steel”—were subject to less severe restrictions that were also eased more quickly.

It was not until November 2020, that both areas within and outside of the Ring of Steel could operate under the same restrictions in terms of public health.

You can find the paper in a file uploaded to SSRNLast week, Deakin University Professors Chyi Lin Lee, Jian Liang and Qiang L of New South Wales University used the policy differences of each side of the Ring of Steel, to discover the financial value that people place on the inability to live under a COVID security system.

They used a database of rentals and sales to determine changes in the home values of suburban residents within the Ring of Steel boundaries during Victoria’s successive lockdown stages.

Researchers said that focusing on rents and home sales in suburb communities located just a short distance from the Ring of Steel helps to filter price drops caused by a fall in urban density within Melbourne’s metropolitan area during the pandemic.

During Victoria’s first March-to-June lockdown—when the whole state was subject to the same restrictions—these researchers found no statistically difference in the change in home prices and rents within 2.5 kilometers of the Ring of Steel boundary.

But during the second lockdown between July and November 2020—when the Ring of Steel was established—home sale prices within the boundary dropped by 1.8-3.1 percent when compared to home sales outside of it. The researchers found similar differences in rent prices.

The difference in rents and home sales values grew by 6.3-7% between November 2020 and January 2021 when the Ring of Steel was removed and restrictions on public health were lifted in both regions.

Liang, Lee and Li claim that the lockdown reflects residents’ continuing worry about a harsher lockdown in metropolitan Melbourne.

They write that “these findings suggest that residents perceive that there is a greater risk of locking down restrictions in the Ring of Steel.” “The perception that lockdown is a risk causes people to choose areas where there’s a higher risk of being locked down than those in lower risk zones.”

The paper notes that officials from the government repeatedly stressed Ring of Steel’s importance as a panademic-fighting measure. This, they claim, contributed to the fear of more lockdowns.

Liang, Lee and Li use this drop in rents to estimate the weekly cost of health restrictions within Ring of Steel at between $14 million and $34 millions. Researchers note this number is unlikely to be accurate as metropolitan Melbourne was not entirely free of restrictions on public health.

Victoria’s Ring of Steel offers a fascinating opportunity for people to evaluate how valuable it is not being subject to the strictest pandemic restrictions in developed countries.

The COVID-19 pandemic caused domestic migration in the U.S. to be similar. The Federal Reserve Bank of Kansas published a November paper that found that while the epidemic did not affect pre-COVID migration patterns, it did increase outmigration from America’s most urbanized areas.

Fed researchers Jason Brown and Colton Tousey chalk this up people’s attempt to mitigate the perceived risk of COVID-19 that comes with living in a dense urban area and their desire to escape strict lockdown measures—which have generally been harshest within the country’s largest cities.

However, unlike Melbourne, the rents and occupancy rates in U.S. major cities such as New York and San Francisco are rising from their pandemic-era lows.

It could also be due to policymakers who are reluctant to impose costly, unpopular and restrictive capacity limits on these cities. They have since been replaced by vaccine passport and mask mandate systems. Liberal city dwellers consider these to be easier to live with, and even more desirable.

Were harsher measures to come back, people might vote with their feet again and decamp for smaller, freer metro areas—even if the cost of doing so goes up a few percentage points.