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Estimating Consumer Valuation of Earthquake Risk: Evidence from Japanese Housing Markets

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Author Info

  • Michio Naoi

    ()
    (Keio University)

  • Kazuto Sumita

    ()
    (Kanazawa Seiryo University)

  • Miki Seko

    ()
    (Keio University)

Abstract

The relationships between seismic risk and rental and owner- occupied housing prices in the whole of Japan are examined. The empirical results from hedonic regressions with earthquake risk indices suggest that: (1) earthquake occurrence probability has a significantly negative effect on monthly housing rent, (2) the effect of earthquake probability seems to depend on the characteristics of the individual housing unit (e.g. age of dwelling) for owner-occupied housing, (3) the estimated risk premium is much larger for older buildings, and (4) the share of quake-resistant dwellings in the neighborhood area is significantly and positively related to the housing price of the individual unit. These results suggest that anti-seismic policies that target specific groups of dwellings, such as rental houses and older buildings, help to mitigate welfare loss due to earthquakes.

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Bibliographic Info

Article provided by Asian Real Estate Society in its journal International Real Estate Review.

Volume (Year): 13 (2010)
Issue (Month): 2 ()
Pages: 117-133

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Handle: RePEc:ire:issued:v:13:n:02:2010:p:117-133

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Postal: Asia Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Postal: Asian Real Estate Society, 51 Monroe Street, Plaza E-6, Rockville, MD 20850, USA
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Related research

Keywords: Earthquake; Hedonic price model; Risk premium;

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  1. Michio Naoi & Miki Seko & Kazuto Sumita, 2010. "Community Rating, Cross Subsidies and Underinsurance: Why so many Households in Japan do not Purchase Earthquake Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 40(4), pages 544-561, May.
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