The Impact of Flood Risk on the Price of Residential Properties: The Case of England
||Belanger, Philippe; Michael Bourdeau-Brien
||The Impact of Flood Risk on the Price of Residential Properties: The Case of England
||23rd Annual European Real Estate Society Conference in Regensburg, Germany
||Background – Whether due to climate change or due to bad urban planning, flooding is an important issue. Climate change impact on see level and precipitation amount is well known and will eventually increase the number of flooding areas. Another reason for change in flooding area is the urban development and bad water management planning. Flooding area maps are been updated to take into account new risk. Been in these new flooding risk area is likely to have an impact on real estate value.Purpose–This paper intend to bring a contribution about the value lost in flooding area. The paper present preliminary result using UK and Quebec (Canada) data.Methodology/Design–We use transaction databases, geographic information system (GIS) and building characteristics in order to analyze the impact of been in flooding area on the value of a residential building. Since houses near water usually has value added we control for the water shore distance. Literature shows that flooding area usually has impact on real estate value. Nevertheless some study show mitigated results. We suspect that it is due to value added to houses which are on water shore. UK database is compose of more than 250’000 transactions. UK has 3 flooding area maps definition, we compute the regression for all of them. Quebec city data are been gathered at this moment and descriptive statistics will be available at the moment of the conference.Results–As of now, results are preliminary but at the time of the conference, we will results for at least one of the two location. We expect the impact to be in line with the literature for UK using historical flooding maps while we expect mitigated for flood risk maps. For Quebec, we expect some area to have more impact due to the very strong media coverage.Limitations–For UK, individual characteristic of the building are limited. We use postal code and building type to assume similarity of hedonic characteristics. If houses among the same postal code and type are very heterogeneous the results could be biased.Practical implications–The implication are relevant to compute the value of mitigation installations (dam) or to assess the compensation to be offered to owner impacted by new flood risk area.Originality–We use GIS data allowing to discriminate between water shore proximity and flooding area. We use original data from Quebec which include a high media profile area and several “normal” area.
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||Change and Risk - Issues for Property Valuation work?
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