Perceived Risks of Energy Supply Uncertainty in the Housing Market: Evidence from a Large-Scale Electricity Crisis

Abstract

The growth of large cities necessitates a reliable power supply to support increasing populations and the widespread construction of high-rise residential buildings. Concurrently, the impact of climate change intensifies the strain on energy infrastructure, prompting inquiries into the sustainability of urban life for the general population. This study explores how prospective homebuyers' perception of energy supply uncertainty affects property valuations, particularly in high-rise apartments. We analyze housing transaction data from July 2016 to August 2018 in Kaohsiung City, focusing on the impact of a large-scale electricity crisis from July 29 to August 15, 2017. Our analysis reveals a significant reduction in prices for apartments on upper floors, especially those above the fifth floor, following the crisis. This decrease tend to be more severe for upper floor units in older buildings, neighborhoods with a higher proportion of elderly residents, and middle-income neighborhoods. Moreover, the decline in prices is notably more pronounced in neighborhoods with high electricity consumption, as well as during periods marked by tighter power supply or elevated temperatures. These patterns imply that the reduction in the relative price of units on upper floors is attributed to increased concerns about electricity supply uncertainty. Furthermore, low-income neighborhoods with a higher percentage of high-rise apartments may experience reduced overall in-migration as well as income declines among higherincome groups. Our findings emphasize the economic implications of energy supply uncertainty on property valuations and migration dynamics, highlighting the need for investments in resilient energy infrastructure and targeted policies to support vulnerable populations and enhance community resilience.

Keywords: Risk perception, housing market, energy supply uncertainty, electricity crisis, 7.29 Power Rationing Crisis, 8.15 Blackout JEL Classification Codes: R23, R30, D80, O18, Q49