Sinking Land, Sinking Prices: Land Subsidence and Property Prices in the Netherlands

Martijn Dröes, Marc Francke and Lukas Hofmann

ERES from European Real Estate Society (ERES)

Abstract: This paper examines the effect of land subsidence, the sinking of the land surface, on property values. Land subsidence can affect properties by damaging the foundation or increasing their exposure to flood risk. Based on detailed property transaction data from the Netherlands and high-quality geodata on current and future subsidence and flood risks, we find that property that is currently subsiding trades at a 0.8% discount if it is built on a foundation prone to damage. Flood-prone properties predicted to subside in the future trade at 1.5% lower prices. The estimates indicate that buyers underestimate foundation risk but overestimate flood risk. Furthermore, an increase in Google searches for subsidence by one standard deviation leads to an additional price discount of 0.8% for houses in subsiding areas. This discount is lower for the properties with the highest subsidence risk, further indicating that risk is not adequately priced.

Keywords: Climate Risk; land subsidence; property prices; Risk Perception (search for similar items in EconPapers)
JEL-codes: R3 (search for similar items in EconPapers)
Date: 2025-01-01
New Economics Papers: this item is included in nep-env
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