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Flood prone risk and amenity values: a spatial hedonic analysis

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  • Samarasinghe, Oshadhi
  • Sharp, Basil

Abstract

This study examines the impact of flood-hazard zone location on residential property prices. The study utilises data from over 2000 private residential property sales occurred during 2006 in North Shore City, New Zealand. A spatial autoregressive hedonic model is developed to provide efficient estimates of the marginal effect of flood prone risks on property prices. Results suggest that the sale price of a residential property within a flood prone area is lower than an equivalent property outside the flood prone area. The flood plain location discount is reduced by the release of public information regarding flood risk.

Suggested Citation

  • Samarasinghe, Oshadhi & Sharp, Basil, 2010. "Flood prone risk and amenity values: a spatial hedonic analysis," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 54(4), pages 1-19.
    • Handle: RePEc:ags:aareaj:162020
    DOI: 10.22004/ag.econ.162020
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    1. José Armando Cobián Álvarez & Budy P. Resosudarmo, 2019. "The cost of floods in developing countries’ megacities: a hedonic price analysis of the Jakarta housing market, Indonesia," Environmental Economics and Policy Studies, Springer;Society for Environmental Economics and Policy Studies - SEEPS, vol. 21(4), pages 555-577, October.
    2. Mahmoudi, Parvin & MacDonald, Darla Hatton & Crossman, Neville D. & Summers, David M. & van der Hoek, John, 2013. "Space matters: the importance of amenity in planning metropolitan growth," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(1), pages 1-22.
    3. Małgorzata Dudzińska & Barbara Prus & Radosław Cellmer & Stanisław Bacior & Katarzyna Kocur-Bera & Anna Klimach & Agnieszka Trystuła, 2020. "The Impact of Flood Risk on the Activity of the Residential Land Market in a Polish Cultural Heritage Town," Sustainability, MDPI, vol. 12(23), pages 1-18, December.
    4. Chiang Hsieh, Lin-Han, 2021. "Is it the flood, or the disclosure? An inquiry to the impact of flood risk on residential housing prices," Land Use Policy, Elsevier, vol. 106(C).
    5. Levente Timar & Arthur Grimes & Richard Fabling, 2014. "That Sinking Feeling: The Changing Price of Disaster Risk Following an Earthquake," Working Papers 14_13, Motu Economic and Public Policy Research.
    6. Levente Timar & Arthur Grimes & Richard Fabling, 2018. "Before a Fall: Impacts of Earthquake Regulation on Commercial Buildings," Economics of Disasters and Climate Change, Springer, vol. 2(1), pages 73-90, April.
    7. Mohammad Reza Farzanegan & Mehdi Feizi & Hassan F. Gholipour, 2021. "Drought and Property Prices: Empirical Evidence from Provinces of Iran," Economics of Disasters and Climate Change, Springer, vol. 5(2), pages 203-221, July.
    8. Mutlu, Asli & Roy, Debraj & Filatova, Tatiana, 2023. "Capitalized value of evolving flood risks discount and nature-based solution premiums on property prices," Ecological Economics, Elsevier, vol. 205(C).
    9. Olga Filippova & Cuong Nguyen & Ilan Noy & Michael Rehm, 2020. "Who Cares? Future Sea Level Rise and House Prices," Land Economics, University of Wisconsin Press, vol. 96(2), pages 207-224.
    10. Allan Beltrán & David Maddison & Robert J. R. Elliott, 2018. "Assessing the Economic Benefits of Flood Defenses: A Repeat‐Sales Approach," Risk Analysis, John Wiley & Sons, vol. 38(11), pages 2340-2367, November.
    11. Neelawala, Prasad & Wilson, Clevo & Athukorala, Wasantha, 2013. "The impact of mining and smelting activities on property values: a study of Mount Isa city, Queensland, Australia," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(1), pages 1-19.
    12. Ambrey, Christopher L. & Fleming, Christopher M., 2011. "Valuing scenic amenity using life satisfaction data," Ecological Economics, Elsevier, vol. 72(C), pages 106-115.
    13. Mohammad Reza Farzanegan & Mehdi Feizi & Hassan F. Gholipour, 2019. "Drought and Property Prices: Empirical Evidence from Iran," MAGKS Papers on Economics 201916, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    14. Balbi Stefano & Giupponi Carlo & Mojtahed Vahid & Olschewski Roland, 2015. "The Total Cost of Water-Related Disasters," Review of Economics, De Gruyter, vol. 66(2), pages 225-252, August.
    15. James R. Meldrum, 2016. "Floodplain Price Impacts by Property Type in Boulder County, Colorado: Condominiums Versus Standalone Properties," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 64(4), pages 725-750, August.
    16. Netusil, Noelwah R. & Moeltner, Klaus & Jarrad, Maya, 2019. "Floodplain designation and property sale prices in an urban watershed," Land Use Policy, Elsevier, vol. 88(C).
    17. Stefano Balbi & Carlo Giupponi & Roland Olschewski & Vahid Mojtahed, 2013. "The economics of hydro-meteorological disasters: approaching the estimation of the total costs," Working Papers 2013-12, BC3.
    18. Parvin Mahmoudi & Darla Hatton MacDonald & Neville D. Crossman & David M. Summers & John van der Hoek, 2013. "Space matters: the importance of amenity in planning metropolitan growth," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 57(1), pages 38-59, January.
    19. Hein, Walter & Wilson, Clevo & Lee, Boon & Rajapaksa, Darshana & de Moel, Hans & Athukorala, Wasantha & Managi, Shunsuke, 2019. "Climate change and natural disasters: Government mitigation activities and public property demand response," Land Use Policy, Elsevier, vol. 82(C), pages 436-443.
    20. Hirte, Georg & Nitzsche, Eric & Tscharaktschiew, Stefan, 2018. "Optimal adaptation in cities," Land Use Policy, Elsevier, vol. 73(C), pages 147-169.
    21. Patrick Doupe & Leo Dobes & Frank Jotzo, 2019. "Improving Understanding of Flood Risk: the Effects of Lowering the Cost of Accessing Flood Risk Information," Economics of Disasters and Climate Change, Springer, vol. 3(2), pages 101-117, July.
    22. Beltrán, Allan & Maddison, David & Elliott, Robert, 2019. "The impact of flooding on property prices: A repeat-sales approach," Journal of Environmental Economics and Management, Elsevier, vol. 95(C), pages 62-86.
    23. Quyen Nguyen & Paul Thorsnes & Ivan Diaz‐Rainey & Antoni Moore & Simon Cox & Leon Stirk‐Wang, 2022. "Price recovery after the flood: risk to residential property values from climate change‐related flooding," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(3), pages 532-560, July.
    24. Levente Timar & Arthur Grimes & Richard Fabling, 2015. "Before a Fall: Impacts of Earthquake Regulation and Building Codes on the Commercial Building Market," Working Papers 15_19, Motu Economic and Public Policy Research.
    25. Rajapaksa, Darshana & Zhu, Min & Lee, Boon & Hoang, Viet-Ngu & Wilson, Clevo & Managi, Shunsuke, 2017. "The impact of flood dynamics on property values," Land Use Policy, Elsevier, vol. 69(C), pages 317-325.

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