Flood impact on property value: The case of Canada

Background – Whether due to climate change or due to bad urban planning, flooding is an important issue around the world. The point about climate change impact on see level and precipitation intensity is well known. Those impact will eventually increase the number of flooding area. Another reason for change in flooding area is the urban development and bad water management planning. Quebec City, in Canada, has been sued in court over the impact of flooding likely due to deficient water management for the city. In the same area, flooding area maps have been updated to take into account new risk. Been in these flooding area is likely to have an impact on real estate value. Purpose – This paper intend to bring a contribution about the value lost in flooding area. The paper present preliminary result using Quebec (Canada) data and include the impact of media coverage of risk in the pricing process. Approach / Methodology / Design – We use transaction databases, geographic information system (GIS) and building characteristics in order to analyze the impact of been in flooding area on the value of a residential building. Since houses near water usually has value added we control for the water shore distance. Literature shows that flooding area usually has impact on real estate value. Nevertheless some study show mitigated results. Uk data has been used to develop a methodology and are presented in a forthcoming paper. Quebec City data are based on transaction prices for the last 5 years as well as official municipality valuation. Results – As of now, results are preliminary but at the time of the conference, we will have the results for Quebec city that we will be able to relate the result to those of UK presented last year at ERES 2016. Limitations / implications – Quebec City data has individual characteristics associate with houses but the historical data are 5 years (compare with 20 for UK) and for a smaller area than what was available for UK. Practical implications – This is relevant to compute the value of mitigation installations (dam) or to assess the compensation to be offered to owner impacted by area that are newly at risk of flooding. Flood related depreciation is also relevant for insurance industry for coverage valuation. Originality / Value – We use GIS data allowing and use original data from Quebec which include a high media profile area and several "normal" areas.