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Inundation and Views in Coastal Residential Property Values. Does the Sale Price Reflect the Trade Off?

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Abstract

This study proposes a modeling approach to disentangle the discount due to flooding in residential properties that are located in coastal areas. The study makes three contributions. The first is to incorporate a continuous measure of flood risk in a study of coastal areas, as earlier studies modeled flood risk using a binary variable. The second is to estimate a discount over a three dimensional amenities’ set (degrees of view of the ocean, proximity to the ocean and proximity to other waterways), in order to provide a valuation of the trade o↵ between ’views/proximity’ and flooding. And, finally it is the first study of its kind for Australia. Data for two coastal sites in the state of Queensland, Australia are used in the study. The results indicate that the identification of a significant discount due to inundation risk is highly dependent on views and proximity to ocean and waterways, but the study demonstrates the methodology proposed here is able to disentangle statistically significant discounts due to inundation risk.

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  • 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.
    • Handle: RePEc:qld:uq2004:536
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    File URL: https://economics.uq.edu.au/files/46000/536.pdf
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    1. Van Butsic & Ellen Hanak & Robert G. Valletta, 2011. "Climate Change and Housing Prices: Hedonic Estimates for Ski Resorts in Western North America," Land Economics, University of Wisconsin Press, vol. 87(1), pages 75-91.
    2. Alicia N. Rambaldi & Cameron S. Fletcher & Kerry Collins & Ryan R.J. McAllister, 2013. "Housing Shadow Prices in an Inundation-prone Suburb," Urban Studies, Urban Studies Journal Limited, vol. 50(9), pages 1889-1905, July.
    3. K. G. Mäler & J. R. Vincent (ed.), 2005. "Handbook of Environmental Economics," Handbook of Environmental Economics, Elsevier, edition 1, volume 3, number 3.
    4. Okmyung Bin & Thomas W. Crawford & Jamie B. Kruse & Craig E. Landry, 2008. "Viewscapes and Flood Hazard: Coastal Housing Market Response to Amenities and Risk," Land Economics, University of Wisconsin Press, vol. 84(3), pages 434-448.
    5. Okmyung Bin & Ben Poulter & Christopher F. Dumas & John C. Whitehead, 2011. "Measuring The Impact Of Sea‐Level Rise On Coastal Real Estate: A Hedonic Property Model Approach," Journal of Regional Science, Wiley Blackwell, vol. 51(4), pages 751-767, October.
    6. Craig E. Landry & Paul Hindsley, 2011. "Valuing Beach Quality with Hedonic Property Models," Land Economics, University of Wisconsin Press, vol. 87(1), pages 92-108.
    7. Carolyn Kousky, 2010. "Learning from Extreme Events: Risk Perceptions after the Flood," Land Economics, University of Wisconsin Press, vol. 86(3).
    8. Cheshire, Paul & Sheppard, Stephen, 1995. "On the Price of Land and the Value of Amenities," Economica, London School of Economics and Political Science, vol. 62(246), pages 247-267, May.
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    Cited by:

    1. Olga Filippova & Cuong Nguyen & Ilan Noy & Michael Rehm, 2020. "Who Cares? Future Sea Level Rise and House Prices," Land Economics, University of Wisconsin Press, vol. 96(2), pages 207-224.
    2. Renuka K. Ganegodage & Peyman Khezr & Rabindra Nepal, 2016. "The Effect of Undesirable Land Use Facilities on Property Values: New Evidence from Australian Regional Fossil-Fired Plants," Discussion Papers Series 569, School of Economics, University of Queensland, Australia.

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    More about this item

    Keywords

    hedonic models; spatial econometric models; inundation risk measures; pricing flooding risk;
    All these keywords.

    JEL classification:

    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • R32 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Other Spatial Production and Pricing Analysis

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