Climate change's impact on real estate prices in Chile

Climate change should deteriorate the value of real estate, but studies are lacking for developing economies which may suffer the worst weather changes. We match an administrative register of all the real estate properties' transactions in Chile between 2002 and 2020 with a high spatial resolution dataset of local temperatures and precipitation. Even after controlling for a wide set of home characteristics or fixed-effects for each property, we find that fluctuations in temperatures had an impact on the prices of residential homes and agricultural properties. This work assesses the impact of climate change on real estate prices in Chile, analyzing two key climate change dimensions: change in temperature and change in precipitation. Chile presents a particular setting since it has a high climatic amplitude, allowing us to exploit the impact of temperature and rainfall on real estate prices for both low and high temperatures and more humid or dry regions. Our results show that hotter maximum temperatures during the Summer, Fall, and Winter seasons lowered the prices of residential homes. This result is consistent with the desire of households to avoid extremely hot days. Agriculture properties suffer an adverse effect from higher maximum and minimum Winter temperatures while experiencing a positive impact from higher minimum temperatures in the Summer, Fall, and Spring seasons, evidencing a preference from owners to avoid low temperatures except in Winter. Finally, from a prospective point of view, ex expects that maximum temperatures will have a negligible effect on Agricultural property prices in 2050. However, for the Residential Homes' prices, the higher maximum temperatures in 2050 could represent a substantial negative effect between -10.0% and -12.3% for the different possible scenarios.