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Price recovery after the flood: risk to residential property values from climate change-related flooding

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  • Nguyen, Quyen
  • Thorsnes, Paul
  • Diaz-Rainey , Ivan
  • Moore, Antoni
  • Cox, Simon
  • Stirk-Wang, Leon

Abstract

We take advantage of a combination of a severe weather event from 3 to 4 June 2015 and a local policy, to investigate the housing market response to climate changerelated flooding hazard. The study focuses on a residential area in a low-lying coastal suburb of Dunedin, New Zealand, where the groundwater level is shallow and close to sea level. An unusually heavy rain event in June 2015 resulted in flooding of a significant portion of land in especially low-lying areas. The city council responded by reviewing processes for storm-water management and by imposing minimum-floorlevel [MFL] requirements on new construction in the low-lying areas previously identified as at risk of flooding. Applying a ‘diff-in-diff-in-diff’ strategy in hedonic regression analyses, we find that houses in the MFL zone sell for a discount of about 5 per cent prior to the flood. This discount briefly tripled in the area that flooded, but disappeared within 15 months, indicating either very short memory among homebuyers or no long-run change in perception of hazard.

Suggested Citation

  • Nguyen, Quyen & Thorsnes, Paul & Diaz-Rainey , Ivan & Moore, Antoni & Cox, Simon & Stirk-Wang, Leon, 2022. "Price recovery after the flood: risk to residential property values from climate change-related flooding," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 66(03), January.
    • Handle: RePEc:ags:aareaj:343021
    DOI: 10.22004/ag.econ.343021
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    References listed on IDEAS

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    2. Irani Arraiz & David M. Drukker & Harry H. Kelejian & Ingmar R. Prucha, 2010. "A Spatial Cliff‐Ord‐Type Model With Heteroskedastic Innovations: Small And Large Sample Results," Journal of Regional Science, Wiley Blackwell, vol. 50(2), pages 592-614, May.
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