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Housing shadow prices in an inundation prone suburb

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For urban areas already exposed to flooding risk, the prospect of increased population densities and of more frequent extreme weather associated with climate change is alarming. Proactive adaptation, including changes to planning schemes, can reduce the risks faced in such urban areas. However empirical information detailing the benefits of proactive adaptation is limited. Further, in order to engage and motivate residents within exposed areas to participate in any adaptation, how (and when) adaptation measures will impact on individuals need to be understood. To inform such thinking, we present here a detailed case study of climate adaptation to inundation. We present a hedonic approach that evaluates property values and preferences in an inner city suburb in Brisbane, Australia, which contains areas that are in a floodplain. Using a dataset specially constructed by the authors, the study defines a continuous effect of flooding such that discount on property prices depends on its vertical distance relative to its 1-in-100-year flood level. The discount is of the order of 5.5% per metre below the 1-in-100 year flood level. Due to the detailed hedonic characteristics included in the dataset, the study also provides estimates of the shadow prices of housing characteristics and distances to amenities (such as bus stops, train stations, parks and bikeways). Such factors need to be considered when holistically assessing the dynamics of urban areas in response to planning changes.

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  • Alicia Rambaldi & Ryan McAllister & Kerry Collins & Cameron Fletcher, 2011. "Housing shadow prices in an inundation prone suburb," Discussion Papers Series 429, School of Economics, University of Queensland, Australia.
  • Handle: RePEc:qld:uq2004:429
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    Cited by:

    1. de Koning, Koen & Filatova, Tatiana & Bin, Okmyung, 2017. "Bridging the Gap Between Revealed and Stated Preferences in Flood-prone Housing Markets," Ecological Economics, Elsevier, vol. 136(C), pages 1-13.
    2. Tapsuwan, Sorada & Polyakov, Maksym & Bark, Rosalind & Nolan, Martin, 2015. "Valuing the Barmah–Millewa Forest and in stream river flows: A spatial heteroskedasticity and autocorrelation consistent (SHAC) approach," Ecological Economics, Elsevier, vol. 110(C), pages 98-105.
    3. Chi-Hsiang Wang & Yong Khoo & Xiaoming Wang, 2015. "Adaptation benefits and costs of raising coastal buildings under storm-tide inundation in South East Queensland, Australia," Climatic Change, Springer, vol. 132(4), pages 545-558, October.
    4. Wasantha Athukorala & Wade Martin & Prasad Neelawala & Darshana Rajapaksa & Clevo Wilson, 2016. "Impact Of Wildfires And Floods On Property Values: A Before And After Analysis," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 61(01), pages 1-23, March.
    5. Alicia N. Rambaldi & Ryan R. J. McAllister & Cameron S. Fletcher, 2015. "Decoupling land values in residential property prices: smoothing methods for hedonic imputed price indices," Discussion Papers Series 549, School of Economics, University of Queensland, Australia.
    6. Paul Frijters & Benno Torgler & Darshana Rajapaksa & Clevo Wilson & Shunsuke Managi & Vincent Hoang & Boon Lee, 2016. "Flood Risk Information, Actual Floods and Property Values: A Quasi-Experimental Analysis," The Economic Record, The Economic Society of Australia, vol. 92, pages 52-67, June.
    7. Alicia N. Rambaldi & K. Renuka Ganegodage & Cameron S. Fletcher & Felix Lipkin, 2014. "Inundation and Views in Coastal Residential Property Values. Does the Sale Price Reflect the Trade Off?," Discussion Papers Series 536, School of Economics, University of Queensland, Australia.

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