Assessing the impact of wildfires on the Swedish housing market: A case study of the 2014 Västmanland wildfire

The literature on wildfires and residential property prices is limited and primarily focuses on wildfires in North America. There is a lack of studies examining this relationship in Europe. With the largest forest area in the entire EU, this relationship is particularly relevant to explore in a Swedish context. In this paper, we investigate how the largest wildfire in Sweden's recent history, the 2014 wildfire in Västmanland County, affected nearby housing prices. Using a difference-in-differences method, we find a significant negative effect. Our most conservative estimate indicates an approximate 2.7% reduction in final selling prices for post-fire sales located within 20 km of the wildfire area. However, the negative effect is larger when defining the treated area as a 5 km (-10.1%) or 10 km (-8.9%) distance to the fire, or when using a repeated sales sample that includes only single-family houses. In a heterogeneity assessment with respect to housing types, we find that our effects are driven by the impact on single-family houses rather than apartments. For the former group, we find large negative and significant effects, but we do not detect any impact on apartment prices. The largest impact on prices occurs in the first months after the wildfire and are identified along the trajectory of the fire’s smoke.