Sinking Land, Sinking Prices? Land Subsidence, Flood Risk, and Property Prices

Lukas Hofmann, Martijn Dröes and Marc Francke
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Lukas Hofmann: University of Amsterdam and Tinbergen Institute
Martijn Dröes: University of Amsterdam
Marc Francke: University of Amsterdam and Tinbergen Institute

No 25-040/IV, Tinbergen Institute Discussion Papers from Tinbergen Institute

Abstract: This paper examines the effect of land subsidence -- the gradual sinking of the Earth's surface -- on property values. Subsidence can negatively affect real estate by damaging building foundations and increasing vulnerability to flooding. Using detailed property transaction data from the Netherlands, combined with high-resolution geospatial data on both current and projected subsidence and flood risk, we find that properties currently experiencing subsidence sell at a 0.8% discount when built on foundations susceptible to damage. Additionally, flood-prone properties projected to experience future subsidence sell for 1.5% less. Compared to the actual costs and occurrence of these risks, our findings suggest that homeowners tend to underestimate the risks associated with foundation damage while overestimating the threat of future flooding.

Keywords: Land subsidence; property prices; climate risk; risk perception (search for similar items in EconPapers)
JEL-codes: G10 Q54 R30 (search for similar items in EconPapers)
Date: 2025-06-26
New Economics Papers: this item is included in nep-res
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