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Flood risk and housing prices: evidence from Hungary

Author

Listed:
  • Gabor Bekes

    () (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences and CEPR)

  • Aron Horvath

    () (Institute of Economics - Centre for Economic and Regional Studies Hungarian Academy of Sciences and ELTINGA Centre for Real Estate Research)

  • Zoltan Sapi

    () (Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences and ELTINGA Centre for Real Estate Research)

Abstract

This study employs the hedonic property price method to analyze the flood risk effect on a rich set of data. The analysis is carried out on Hungary, but as the control variables are extremely elaborated, our results have general importance. The paper finds a significant reduction in housing prices accounted to ZIP code level flood risk even after controlling for a wide range of geographical and socio-economic features. This paper finds that flood risk reduces housing prices substantially. It turns out that the average elasticity is driven by being in close proximity of major rivers. While riverside areas have an overall price premium in Hungary, risky areas loose this advantage to flood risk. In ZIP code areas where the inundation depths are 10% higher, housing prices tend to be 1% lower on average plus another 1% lower along the major rivers.

Suggested Citation

  • Gabor Bekes & Aron Horvath & Zoltan Sapi, 2016. "Flood risk and housing prices: evidence from Hungary," CERS-IE WORKING PAPERS 1620, Institute of Economics, Centre for Economic and Regional Studies.
  • Handle: RePEc:has:discpr:1620
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    File URL: http://econ.core.hu/file/download/mtdp/MTDP1620.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    housing; hedonic pricing; flood risk; geography;
    All these keywords.

    JEL classification:

    • Q51 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Valuation of Environmental Effects
    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R30 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - General
    • R31 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Housing Supply and Markets

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