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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
 
   

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