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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," IEHAS Discussion Papers 1620, Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences.
  • Handle: RePEc:has:discpr:1620
    as

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    File URL: http://econ.core.hu/file/download/mtdp/MTDP1620.pdf
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    References listed on IDEAS

    as
    1. Daniel, Vanessa E. & Florax, Raymond J.G.M. & Rietveld, Piet, 2009. "Flooding risk and housing values: An economic assessment of environmental hazard," Ecological Economics, Elsevier, vol. 69(2), pages 355-365, December.
    2. Cho, Seong-Hoon & Bowker, James Michael & Park, William M., 2006. "Measuring the Contribution of Water and Green Space Amenities to Housing Values: An Application and Comparison of Spatially Weighted Hedonic Models," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 0(Number 3), pages 1-23, December.
    3. Stephen Gibbons & Susana Mourato & Guilherme Resende, 2014. "The Amenity Value of English Nature: A Hedonic Price Approach," Environmental & Resource Economics, Springer;European Association of Environmental and Resource Economists, vol. 57(2), pages 175-196, February.
    4. Zhang, Lei, 2016. "Flood hazards impact on neighborhood house prices: A spatial quantile regression analysis," Regional Science and Urban Economics, Elsevier, vol. 60(C), pages 12-19.
    5. Hugh O. Nourse, 1963. "The Effect of Public Housing on Property Values in St. Louis," Land Economics, University of Wisconsin Press, vol. 39(4), pages 433-441.
    6. Rosen, Sherwin, 1974. "Hedonic Prices and Implicit Markets: Product Differentiation in Pure Competition," Journal of Political Economy, University of Chicago Press, vol. 82(1), pages 34-55, Jan.-Feb..
    7. Bin, Okmyung & Landry, Craig E., 2013. "Changes in implicit flood risk premiums: Empirical evidence from the housing market," Journal of Environmental Economics and Management, Elsevier, vol. 65(3), pages 361-376.
    8. Okmyung Biny & Stephen Polasky, 2004. "Effects of Flood Hazards on Property Values: Evidence Before and After Hurricane Floyd," Land Economics, University of Wisconsin Press, vol. 80(4).
    9. Geoffrey K. Turnbull & Velma Zahirovic-Herbert & Chris Mothorpe, 2013. "Flooding and Liquidity on the Bayou: The Capitalization of Flood Risk into House Value and Ease-of-Sale," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 41(1), pages 103-129, March.
    10. repec:bla:reesec:v:45:y:2017:i:4:p:829-860 is not listed on IDEAS
    11. Brent L. Mahan & BStephen Polasky & Richard M. Adams, 2000. "Valuing Urban Wetlands: A Property Price Approach," Land Economics, University of Wisconsin Press, vol. 76(1), pages 100-113.
    Full references (including those not matched with items on IDEAS)

    More about this item

    Keywords

    housing; hedonic pricing; flood risk; geography;

    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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