Seeing is Believing? Evidence from Property Prices in Inundated Areas

A view to die for? Housing value, wildfire risk, and environmental amenities

Utilizing a unique database of residential real estate transactions, we examine the price change near the boundary of the Bushfire Prone Area (BPA), a planning zone indicating high wildfire risk, after experiencing a salient wildfire event in Australia from 2015 to 2016. While the properties within the BPA are valued more by 1.6%-1.9% in general, home buyers pay less for the properties in the BPA by 0.9%-1.7% after experiencing a salient wildfire event compared with the properties located outside of the BPA. Moreover, the properties in the BPA with greater environmental amenities are more resilient to the impact of wildfire risk salience than the rest BPA, necessitating an analysis of the role of environmental amenities in the research on wildfire risk in the housing market context.

The Economic Effects of Volcanic Alerts-A Case Study of High-Threat U.S. Volcanoes

A common concern about volcanic unrest is that the communication of information about increasing volcanic alert levels (VALs) to the public could cause serious social and economic impacts even if an eruption does not occur. To test this statement, this study examined housing prices and business patterns from 1974-2016 in volcanic regions with "very-high" threat designations from the U.S. Geological Survey (USGS)-Long Valley Caldera (LVC), CA (caldera); Mount St. Helens (MSH), Washington (stratovolcano); and Kīlauea, Hawai'i (shield volcano). To compare economic trends in nonvolcanic regions that are economically dependent on tourism, Steamboat Springs, CO, served as a control as it is a ski-tourism community much like Mammoth Lakes in LVC. Autoregressive distributed lag (ARDL) models predicted that housing prices were negatively affected by VALs at LVC from 1982-1983 and 1991-1997. While VALs associated with unrest and eruptions included in this study both had short-term indirect effects on housing prices and business indicators (e.g., number of establishments, employment, and salary), these notifications were not strong predictors of long-term economic trends. Our findings suggest that these indirect effects result from both eruptions with higher level VALs and from unrest involving lower-level VAL notifications that communicate a change in volcanic activity but do not indicate that an eruption is imminent or underway. This provides evidence concerning a systemic issue in disaster resilience. While disaster relief is provided by the U.S. federal government for direct impacts associated with disaster events that result in presidential major disaster declarations, there is limited or no assistance for indirect effects to businesses and homeowners that may follow volcanic unrest with no resulting direct physical losses. The fact that periods of volcanic unrest preceding eruption are often protracted in comparison to precursory periods for other hazardous events (e.g., earthquakes, hurricanes, flooding) makes the issue of indirect effects particularly important in regions susceptible to volcanic activity.

The impact of Tsunamis on land appraisals: Evidence from Western Japan

This paper estimates the impact of the tsunami caused by the Great East Japan earthquake on land appraisals of various locations outside of directly damaged areas. The focus is on locations that are expected to be extensively damaged by a tsunami if the Nankai Trough earthquake occurs. We use the DID and DDD approaches and show that locations with low elevation and close to the sea experienced decreases in appraised land prices compared to locations with high elevation and far from the sea. Especially, locations with less than 3.6m elevation and within 1.46km of the coastline experienced significant decreases in appraised land prices. This result implies that people have changed their location preferences regarding elevation and distance from the sea.

Evaluating the Impact of Floods on Housing Price Using a Spatial Matching Difference-In-Differences (SM-DID) Approach

Many applications have relied on the hedonic pricing model (HPM) to measure the willingness-to-pay (WTP) for urban externalities and natural disasters. The classic HPM regresses housing price on a complete list of attributes/characteristics that include spatial or environmental amenities (or disamenities), such as floods, to retrieve the gradients of the market (marginal) WTP for such externalities. The aim of this paper is to propose an innovative methodological framework that extends the causal relations based on a spatial matching difference-in-differences (SM-DID) estimator, and which attempts to calculate the difference between sale price for similar goods within “treated” and “control” groups. To demonstrate the potential of the proposed spatial matching method, the researchers present an empirical investigation based on the case of a flood event recorded in the city of Laval (Québec, Canada) in 1998, using information on transactions occurring between 1995 and 2001. The research results show that the impact of flooding brings a negative premium on the housing price of about 20,000$ Canadian (CAN).

Economic diversification and the resiliency hypothesis: Evidence from the impact of natural disasters on regional housing values

We estimate the effect regional economic diversification has on the resiliency of the U.S. housing market, treating the spatial and temporal variation in natural disasters as exogenous shocks to regional economies. Our study demonstrates that diversity dampens both the magnitude and the duration of the effects of a disaster on local real estate values. Implications of our findings for the potential benefits of diversification in regional economies are discussed.

Using GIS to Explore the Potential of Business Rating Data to Analyse Stock and Value Change for Land Administration: A Case Study of York

This study explores the potential of GIS to map and analyse the distribution, stock and value of commercial and industrial property using rating data compiled for the purposes of charging business rates taxation on all non-residential property in the UK. Rating data from 2010, 2017 and 2019, comprising over 6000 property units in the City of York, were filtered and classified by retail, office and industrial use, before geocoding by post code. Nominal rateable values and floor areas for all premises were aggregated in 100 m diameter hexagonal grid and average rateable value calculated to reveal changes in the distribution and value of all employment floorspace in the City over the last decade. Temporospatial analysis revealed polarisation of York’s retail property market between the historic city centre and out-of-town locations. Segmenting traditional retail from food and drink premises revealed growth in the latter has mitigated the hollowing out of the city core. This study is significant in developing a replicable and efficient method of using GIS, using a nationally available rating dataset, to represent changes in the quantum, spatial distribution and relative value of employment floorspace over time to inform local and national land administration, spatial planning and economic development policy making.

Risk Perception and Property Value: Evidence from Tianjin Port Explosion

This paper aims to investigate the perceived risk after the Tianjin port explosion event and its impact on property value. In addition to focusing on the relationship between homebuyers’ risk perception and property sales price, this paper also considers the risk perception of property sellers via the sale-to-list ratio. By using the difference-in-differences method and the sample from the property agent, we found that the explosion event generated a long-time effect on the public and property market in the city of Tianjin. Relative to those properties far away from the explosion site, the sales price and the sale-to-list ratio of the property near the explosion site were detected to have significant drops for the first six months after the explosion event. The temporal decrease of the relative sales price and the sale-to-list ratio are the evidence of short period overreaction from the public, which decays over time. This study demonstrates an indirect method to estimate the perceived risk of the general public and provides valuable insight into sustainable port management policies.

Impacts of environmental disturbances on housing prices: A review of the hedonic pricing literature

The global environment is susceptible to many types of change, including alterations to the world's climate. Climate change has been linked to a host of modifications to the natural environment, including the increasing frequency and severity of disturbances such as pest outbreaks, invasions by non-native species, and wildfire. These in turn pose substantial risks to human wellbeing and health. Estimates of the direct and indirect costs of these events are important prerequisites to well-rounded cost-benefit analyses of preventative or control measures, themselves essential components of appropriate education, policy and management responses. This review brings together the evidence with respect to the impacts of disturbances such as pests, invasive species and wildfire on residential property values as measured using the hedonic pricing method. It demonstrates that whilst most disturbances have the expected negative or an insignificant house price impact, in some cases disturbances can lead to housing price rise. The possible causes and implications of these unanticipated positive price responses are discussed. Broader consequences of all directions of price impact are also considered, in particular for the development and implementation of polices designed to prevent the occurrence or spread of disturbances, or at a minimum mitigate their negative effects.

Assessing the Economic Benefits of Flood Defenses: A Repeat-Sales Approach

In this article we identify the impact of the construction of flood defenses on property prices using a difference-in-differences repeat-sales methodology. Our data set contains information on over 12 million individual property transactions, which is merged with GIS data identifying the spatial location and main characteristics of 1,666 flood defenses built in England between 1995 and 2014. Results suggest that at the finer 6-digit postcode level the construction of flood defenses raises urban house prices by 12.6% to 16.7%. However, for rural properties at the slightly coarser 5-digit postcode level the construction of defenses reduces house prices by 0.8% to 5.0%. This suggests that in certain locations the disamenity impact of flood defenses and the perceived threat of redirected flooding outweigh the benefits of reduced flood risk.

Is Flood Risk Capitalized into Real Estate Market Value? A Mahalanobis-Metric Matching Approach to the Housing Market in Gyeonggi, South Korea

In this study, we investigate how far away and for how long past flooding affected single-family housing values in Gyeonggi, South Korea. In order to empirically explore the geographic and temporal extent of the effects, we adopt two analytical methods: random-intercept multilevel modeling and Mahalanobis-metric matching modeling. The analytical results suggest that the geographic extent of the discount effect of a flooding disaster is within 300 m from an inundated area. Market values of housing located 0–100, 100–200, and 200–300 m from inundated areas were lower by 11.0%, 7.4%, and 6.3%, respectively, than counterparts in the control group. The effect lasted only for 12 months after the disaster and then disappeared. During the first month, 1–3 months, and 3–6 months after a flood, housing units in the disaster-influenced area (within 300 m of the inundated area) were worth, on average, 57.6%, 49.2%, and 45.9% less than control units, respectively. Also, within the following 6 months, the discount effects were reduced to 33.2%. On the other hand, the results showed no statistically significant effects on market values more than 12 months after the disaster. By providing insights into how people perceive and respond to natural hazards, this research provides practical lessons for establishing sustainable disaster management and urban resilience strategies.

Integrating Entropy-Based Naïve Bayes and GIS for Spatial Evaluation of Flood Hazard

Regional flood risk caused by intensive rainfall under extreme climate conditions has increasingly attracted global attention. Mapping and evaluation of flood hazard are vital parts in flood risk assessment. This study develops an integrated framework for estimating spatial likelihood of flood hazard by coupling weighted naïve Bayes (WNB), geographic information system, and remote sensing. The north part of Fitzroy River Basin in Queensland, Australia, was selected as a case study site. The environmental indices, including extreme rainfall, evapotranspiration, net-water index, soil water retention, elevation, slope, drainage proximity, and density, were generated from spatial data representing climate, soil, vegetation, hydrology, and topography. These indices were weighted using the statistics-based entropy method. The weighted indices were input into the WNB-based model to delineate a regional flood risk map that indicates the likelihood of flood occurrence. The resultant map was validated by the maximum inundation extent extracted from moderate resolution imaging spectroradiometer (MODIS) imagery. The evaluation results, including mapping and evaluation of the distribution of flood hazard, are helpful in guiding flood inundation disaster responses for the region. The novel approach presented consists of weighted grid data, image-based sampling and validation, cell-by-cell probability inferring and spatial mapping. It is superior to an existing spatial naive Bayes (NB) method for regional flood hazard assessment. It can also be extended to other likelihood-related environmental hazard studies.