Environmental Determinants of Housing Prices: The Impact of Flood Zone Status (original) (raw)

The impact of flood dynamics on property values

Land Use Policy, 2017

There is evidence that environmental amenities and dis-amenities may be nonlinearly related to property valuation. This would bring inconsistency in estimating environmental variables of the hedonic price model. To explore the linearity of the relationship this study analyses spatial and temporal variation impacts of the 2011 Brisbane flood on property markets using semi-parametric estimation. The results show that most environmental variables impacts on property values nonlinearly, and in particularly distance to the river, indicating that the amenity value of being close to a river outweighs the flood risks. The estimation of the combined impact of elapsed time and neighbourhood income indicates that the flood risk impact on property markets disappears over time.

The Spatial and Temporal Variability of Residential Real Estate Values in Response to Flooding

Disasters, 1988

A relationship between residential property values and the incidence of flooding is represented, using a case study of two Californian communities that were flooded following a levee break. Analysis of the real estate market before and after the flood shows that the flood was capitalized into housing values, whereby both list and selling prices dropped immediately and have recently begun to recover. However, recovery of the market is not uniform throughout the floodplain. Houses that suffered eighteen inches of water recovered to near pre-flood values in less than one year. In contrast, houses that had approximately ten feet of water in them have not recovered to the same extent, indicating that capitalization and recovery do not occur evenly. These findings suggest that policies and programs should address these spatial and temporal differences in recovery, which are expected to vary with different flood frequencies and magnitudes.

Flood and Land Property Values

Asian Social Science, 2016

Flood disaster has become a natural concern to the land owners where it raised a critical issue in term of land value depreciation. Previous studies have discussed the issue of potential decline in the value of land which are located on the flood-liable area. However, in Malaysia, current studies on flood impact are considered limited and do not focus on the effects of flood on land property. With the Hedonic Pricing Model (HPM) approach, we investigate the effect of flood on agricultural and industrial land property values in the urban and rural areas in Malaysia. The analysis indicates that the agricultural and industrial land values in the urban and rural areas have significantly decreased due to flood events. This study will benefit the land owners to understand the flood impact on land value and also the factors that contribute to the loss in the land value. It becomes the responsibility of the land owner to put the asset and property to its best use, given the presence of the flood. In addition, this study will help the policy maker to design and allocate land development efficiently in the urban or rural areas for agricultural and industrial project to ensure depreciation value of the land is minimized in the case of flood.

The Impact of Waterfront Location on Residential Home Values Considering Flood Risks

Journal of Sustainable Real Estate, 2019

We confirm existing findings of significant premiums for waterfront proximity, more so for oceans, bays, and large lakes than rivers. We then expand research on housing price trends immediately before and after major storms indirectly affected markets. Our findings support a consensus view that single-family home prices rebound quickly to prior macro trends after major storms, with little persistent negative impact on value. In addition, using elevation as a proxy for flood risks associated with sea level rise, we find inconsistent evidence that the market perceives flood risk and discounts property prices accordingly. The absence of a permanent market reaction may change as the market is exposed to increases in insurance premiums or other direct pricing of the risks. Our results suggest either a short-term horizon for buyers of coastal properties at risk, or a moral hazard problem whereby residential owners are dependent upon and subsidized by government and mispriced flood risk insurance premiums.

Property Market Valuation of Flood Risk When Insurance is Free

2016

I study the effect of perceived flood risk on property prices in Sweden, before and after a major flood event. Data on property transactions for single-family homes are used in a difference-in-differences spatial hedonic model to study the preand post-flood risk discount. I find no significant price discount for the properties in the floodplain, neither before nor after the flood. This stands in contrast to findings from other countries, where prices have been found to drop significantly after a major flood. An explanatory mechanism driving the difference could be the home insurance system of Sweden, where insurance against flood damages is included free of charge, in contrast to countries investigated in previous studies.

Flood hazards impact on neighborhood house prices: A spatial quantile regression analysis

Regional Science and Urban Economics, 2016

This study examines whether being located within a 100-year floodplain has an impact on the price of residential single-family house sales using house sales data in the Fargo-Moorhead Metropolitan Statistical Area between 2000 and 2013. A spatial quantile regression is applied to investigate the flood hazards impact on conditional higher-vs lower-priced homes, while accounting for spatial autocorrelation. The findings show that the location within a floodplain reduces property value. Furthermore, the negative impact of flood hazards on property values are stronger among lower-priced homes, and weaker among higher-priced homes. In addition, the study examines if a major flood in 2009 had an impact on the home buyers' perception about flood risk. The results show that about a year after the major flood, home buyers responded the most, however, the effect quickly diminished after 2010. Across quantiles, the 2009 flood had more effect on lower-priced than higher-priced homes.

Flood risk insurance, mitigation and commercial property valuation

Property Management

Purpose The purpose of this paper is to understand how built environment professionals approach the valuation of flood risk in commercial property markets and whether insurance promotes mitigation in different insurance and risk management regimes, draw common conclusions and highlight opportunities to transfer learning. Design/methodology/approach An illustrative case study approach involving literature search and 72 interviews with built environment professionals, across five countries in four continents. Findings Common difficulties arise in availability, reliability and interpretation of risk information, and in evaluating the impact of mitigation. These factors, coupled with the heterogeneous nature of commercial property, lack of transactional data and remote investors, make valuation of risk particularly challenging in the sector. Insurance incentives for risk mitigation are somewhat effective where employed and could be further developed, however, the influence of insurance ...

Informed by wet feet: How do floods affect property prices?

2020

We investigate the effect of multiple flood events on property prices in Zurich canton of Switzerland. By merging property transaction data with records from universal and mandatory building insurance, we are able to identify the effect of the informational content of floods separately from the damage caused. Our rich data allows us to control for a wide range of housing characteristics, thus reducing the bias from unobserved heterogeneity that routinely plagues hedonic regressions. We find that houses located in flood hazard zones sell at a discount relative to houses located outside, despite the presence of mandatory insurance that covers most (but not all) costs. Providing flood hazard information increases the value of houses that are assigned a low risk. Last, we look at the effect of floods on property prices and find that in the aftermath of flood events, properties that narrowly escaped damage were sold at a significant discount relative to houses located out of harm's way. This pure information effect decays shortly.

Assessing the impact of floods and flood legislation on residential property prices

The past decade has seen an increase in the number of significant natural disasters that have caused considerable loss of life as well as damage to all property markets in the affected areas. In many cases, these natural disasters have not only caused significant property damage, but in numerous cases, have resulted in the total destruction of the property in the location. With these disasters attracting considerable media attention, the public are more aware of where these affected property markets are, as well as the overall damage to properties that have been damaged or destroyed. This heightened level of awareness has to have an impact on the participants in the property market, whether a developer, vendor seller or investor. To assess this issue, a residential property market that has been affected by a significant natural disaster over the past 2 years has been analysed to determine the overall impact of the disaster on buyer, renter and vendor behaviour, as well as prices in these residential markets. This paper is based on data from the Brisbane flood in January 2011. This natural disaster resulted in loss of life and partial and total devastation of considerable residential property sectors. Data for the research have been based on the residential sales and rental listings for each week of the study period to determine the level of activity in the specific property sectors, and these are also compared to the median house prices for the various suburbs for the same period based on suburbs being either flood affected or flood free. As there are 48 suburbs included in the study, it has been possible to group these suburbs on a socio-economic basis to determine possible differences due to location and value. Data were accessed from realestate.com.au, a free real estate site that provides details of current rental and sales listings on a suburb basis, RP