Sea Level Rise and House Price Capitalisation

22 Pages Posted: 23 Apr 2019

See all articles by Franz Fuerst

Franz Fuerst

University of Cambridge - Department of Land Economy; University of Melbourne; City University of New York - Center for Urban Research

Georgia Warren-Myers

University of Melbourne, Faculty of Architecture, Building and Planning, Students

Date Written: March 10, 2019

Abstract

Economic theory and extant research suggest that flood prone properties should attract a discount. This concept can be extended to properties affected by future sea level rise but there is limited information for purchasers to judge and make informed decisions about their investment. Using a comprehensive dataset comprising statutory rating valuation information and sales transactions for the period 2011 – 2016, a hedonic framework is applied in order to ascertain the implications of the existing flood discount and potential price effects of future sea level rise. The hedonic model identifies a price discount effect for properties affected by known flooded areas, whilst sea level rise has no notable effect on valuations or sales data. The results highlight that purchasers do not appear to price sea level rise risk and are under-prepared for the future challenges and implications sea level rise and the ancillary effects of future flooding, inundation and storm surge.

Keywords: sea level rise, house prices, flood risk, hedonic pricing, information asymmetry

JEL Classification: Q54, R21, R31

Suggested Citation

Fuerst, Franz and Warren-Myers, Georgia, Sea Level Rise and House Price Capitalisation (March 10, 2019). Available at SSRN: https://ssrn.com/abstract=3359289 or http://dx.doi.org/10.2139/ssrn.3359289

Franz Fuerst (Contact Author)

University of Cambridge - Department of Land Economy ( email )

19 Silver Street
Cambridge, CB3 9EP
United Kingdom

HOME PAGE: http://www.landecon.cam.ac.uk/directory/dr-franz-fuerst

University of Melbourne ( email )

185 Pelham Street
Carlton, Victoria 3053
Australia

City University of New York - Center for Urban Research

CUNY The Graduate Center
New York, NY 10011
United States

Georgia Warren-Myers

University of Melbourne, Faculty of Architecture, Building and Planning, Students ( email )

Australia

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