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Estimating Consumer Valuation of Earthquake Risk: Evidence from Japanese Housing Markets

Author

Listed:
  • Michio Naoi

    (Keio University)

  • Kazuto Sumita

    (Kanazawa Seiryo University)

  • Miki Seko

    (Keio University)

Abstract

The relationships between seismic risk and rental and owner- occupied housing prices in the whole of Japan are examined . The empirical results from hedonic regressions with earthquake risk indices suggest that: (1) earthquake occurrence probability has a significantly negative effect on monthly housing rent, (2) the effect of earthquake probability seems to depend on the characteristics of the individual housing unit (e.g. age of dwelling) for owner-occupied housing, (3) the estimated risk premium is much larger for older buildings, and (4) the share of quake-resistant dwellings in the neighborhood area is significantly and positively related to the housing price of the individual unit. These results suggest that anti-seismic policies that target specific groups of dwellings, such as rental houses and older buildings, help to mitigate welfare loss due to earthquakes.

Suggested Citation

  • Michio Naoi & Kazuto Sumita & Miki Seko, 2010. "Estimating Consumer Valuation of Earthquake Risk: Evidence from Japanese Housing Markets," International Real Estate Review, Global Social Science Institute, vol. 13(2), pages 117-133.
    • Handle: RePEc:ire:issued:v:13:n:02:2010:p:117-133
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    References listed on IDEAS

    as
    1. Michio Naoi & Miki Seko & Kazuto Sumita, 2010. "Community Rating, Cross Subsidies and Underinsurance: Why so many Households in Japan do not Purchase Earthquake Insurance," The Journal of Real Estate Finance and Economics, Springer, vol. 40(4), pages 544-561, May.
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    Cited by:

    1. Budi Eko Soetjipto, 2017. "The Impact of Earthquake/Tsunami Threat on Land Prices in Padang, West Sumatera, Indonesia," GATR Journals jber141, Global Academy of Training and Research (GATR) Enterprise.

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    More about this item

    Keywords

    Earthquake; Hedonic price model; Risk premium;
    All these keywords.

    JEL classification:

    • L85 - Industrial Organization - - Industry Studies: Services - - - Real Estate Services

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