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Sinking Land, Sinking Prices? Land Subsidence, Flood Risk, and Property Prices

Author

Listed:
  • Lukas Hofmann

    (University of Amsterdam and Tinbergen Institute)

  • Martijn Dröes

    (University of Amsterdam)

  • Marc Francke

    (University of Amsterdam and Tinbergen Institute)

Abstract

This paper examines the effect of land subsidence -- the gradual sinking of the Earth's surface -- on property values. Subsidence can negatively affect real estate by damaging building foundations and increasing vulnerability to flooding. Using detailed property transaction data from the Netherlands, combined with high-resolution geospatial data on both current and projected subsidence and flood risk, we find that properties currently experiencing subsidence sell at a 0.8% discount when built on foundations susceptible to damage. Additionally, flood-prone properties projected to experience future subsidence sell for 1.5% less. Compared to the actual costs and occurrence of these risks, our findings suggest that homeowners tend to underestimate the risks associated with foundation damage while overestimating the threat of future flooding.

Suggested Citation

  • Lukas Hofmann & Martijn Dröes & Marc Francke, 2025. "Sinking Land, Sinking Prices? Land Subsidence, Flood Risk, and Property Prices," Tinbergen Institute Discussion Papers 25-040/IV, Tinbergen Institute.
    • Handle: RePEc:tin:wpaper:20250040
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    More about this item

    Keywords

    Land subsidence; property prices; climate risk; risk perception;
    All these keywords.

    JEL classification:

    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)
    • 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

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