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Before a Fall: Impacts of Earthquake Regulation on Commercial Buildings

Author

Listed:
  • Levente Timar

    (Motu Economic and Public Policy Research)

  • Arthur Grimes

    (Motu Economic and Public Policy Research
    Victoria University of Wellington)

  • Richard Fabling

    (Motu Economic and Public Policy Research
    Victoria University of Wellington
    Independent Researcher)

Abstract

We test whether the major earthquakes in Christchurch (Canterbury, New Zealand) affected prices of earthquake-prone commercial buildings in Wellington, a city that was directly unaffected by the disaster. Specifically, we test whether official declaration of a Wellington building as earthquake-prone (with a requirement for remediation to minimum earthquake code standards) had an effect on sale price relative to similarly earthquake-prone (but yet-to-be-declared) buildings. We find that the price discount accompanying an earthquake-prone declaration in the CBD averages 45% whereas there is no observable discount on buildings yet-to-be-declared as earthquake-prone. Sale prices of currently-declared earthquake-prone commercial buildings in the suburbs also fell, but not as markedly. The sale probability of officially declared earthquake-prone buildings in Wellington rose markedly after the Christchurch earthquakes unlike the sale probability of yet-to-be-declared earthquake-prone buildings which fell slightly, reflecting buyer caution about such buildings. This pattern is indicative of forced sale of buildings following an official earthquake-prone declaration.

Suggested Citation

  • Levente Timar & Arthur Grimes & Richard Fabling, 2018. "Before a Fall: Impacts of Earthquake Regulation on Commercial Buildings," Economics of Disasters and Climate Change, Springer, vol. 2(1), pages 73-90, April.
    • Handle: RePEc:spr:ediscc:v:2:y:2018:i:1:d:10.1007_s41885-017-0019-9
    DOI: 10.1007/s41885-017-0019-9
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    Cited by:

    1. Olga Filippova & Cuong Nguyen & Ilan Noy & Michael Rehm, 2020. "Who Cares? Future Sea Level Rise and House Prices," Land Economics, University of Wisconsin Press, vol. 96(2), pages 207-224.

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    More about this item

    Keywords

    Earthquake-prone buildings; Commercial property; Property prices; Sales probability;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R33 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Nonagricultural and Nonresidential Real Estate Markets
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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