When climate risks become evident: A natural experiment on risk perceptions in the housing market

Climate-related disasters can affect housing markets by making previously underappreciated risks more salient. This paper studies how a rare and catastrophic quick-clay landslide in Eastern Norway affects housing market outcomes. The event constituted a double information shock for the housing market: extensive national media coverage sharply increased public attention to quick-clay risk, while the same coverage widely disseminated interactive hazard maps and encouraged people to assess whether their own properties were located in at-risk zones. Using detailed property transaction data from Eastern Norway, we combine a two-way fixed effects difference-in-differences design with boundary-based comparisons of properties located near mapped hazard zones. Properties exposed to quick-clay risk experience statistically significant price declines of 1–1.5 percent relative to non-exposed properties, with effects extending beyond the directly affected municipality. Event-study estimates show that the response is temporary, reflecting a short-lived adjustment in risk perceptions. Applying these event-study estimates to exposed properties sold in Eastern Norway during the two-year response period implies a capitalization loss of approximately USD 23 million. We find little indication of effects on transaction volumes, but new residential development in quick-clay risk zones appears to fall by roughly 12 percent. Overall, the findings show that even a highly visible fatal disaster generates a detectable but limited and short-lived housing market response.