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Hedonic Analysis of the Impact of Flood Events on Residential Property Values in Malaysia: A Study of Willingness to Pay

Author

Listed:
  • Nur Hafizah Ismail

    (School of Economics, Finance and Banking, Universiti Utara Malaysia)

  • Mohd Zaini Abd Karim

    (Othman Yeop Abdullah Graduate School of Business, Universiti Utara Malaysia)

  • Bakti Hasan-Basri

    (School of Economics, Finance and Banking, Universiti Utara Malaysia)

Abstract

The effect of flooding on residential property values (RPV) is a major concern to all property buyers and owners. Although numerous studies have already discussed the risk of devaluation of those properties situated in flood prone areas, those that focused on the impact of flooding on residential properties in Malaysia are still limited. This paper extends existing literature by also estimating consumers’ willingness to pay for flood control measures to reduce the flood risk in Malaysia. Using the hedonic pricing model (HPM), our results suggest that the market value of urban and rural residential properties significantly decreases by 18.5 percent and 13.6 percent due to flooding, respectively. The result also shows that, respondents who are risk averse are willing to pay 35.4 percent more for flood control measures to reduce impact of flood risk compared to those who are risk takers. The results of this study can help property owners to understand the factors that contribute to property devaluation due to flooding. This study also proposes flood insurance programmes to be implemented as flooding is a major concern to real property owners.

Suggested Citation

  • Nur Hafizah Ismail & Mohd Zaini Abd Karim & Bakti Hasan-Basri, 2019. "Hedonic Analysis of the Impact of Flood Events on Residential Property Values in Malaysia: A Study of Willingness to Pay," Malaysian Journal of Economic Studies, Faculty of Business and Economics, University of Malaya & Malaysian Economic Association, vol. 56(1), pages 63-84, June.
    • Handle: RePEc:mjr:journl:v:56:y:2019:i:1:p:63-84
    DOI: 10.22452/MJES.vol56no1.4
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    More about this item

    Keywords

    Floods; hedonic price model; property; valuation;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R21 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Household Analysis - - - Housing Demand
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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