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

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

Discussion paper / Internet publication

ID	4607336
Author(s)	Reich, Stephanie K.; Hintermann, Beat; Zischg, Andreas
Author(s) at UniBasel	Hintermann, Beat
Year	2020
Month and day	12-08
Year: comment	2020
Title	Informed by wet feet: How do floods affect property prices?
Series title	WWZ Working Paper
Volume	2020
Number	18
Pages	58
Publisher / Institution	WWZ
Keywords	Flood risk; hedonic pricing; amenity value; availability bias; spatial hedonic model
Abstract	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.
edoc-URL	https://edoc.unibas.ch/79633/
Full Text on edoc	Available

08/05/2024

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