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Is it the flood, or the disclosure? An inquiry to the impact of flood risk on residential housing prices

Lin-Han Chiang Hsieh

Land Use Policy, 2021, vol. 106, issue C

Abstract: In 2015, the government of Taipei, Taiwan, published a series of flood risk maps based on simulation results. It sparked a broad public debate on flood risk information and the real estate market. This study therefore investigates the effect of making flood risk information public on residential housing prices and makes the following contributions. The first contribution concerns public policy. By analysing the relationship between the published flood risk information and more than 12,000 central Taipei sales records in 2015 and 2016, this study finds that the effect of flood risk on housing prices is significant and negative both before and after the maps were disclosed. Although some local variation in the effect of flood risk after the map disclosure was identified, there is no evidence that the disclosure altered the effect on housing prices. This finding suggests that the disclosure of the flood risk maps impacted the effect of the flood risk locally without influencing the market as a whole. Another contribution concerns perception. The result indicates that homebuyers’ negative attitude towards flood risk mainly focuses on the risk under low-intensity, high-frequency rainfall conditions. The final contribution of this study concerns its methodological perspective. By combining the spatial fixed-effect (SFE) model with geographically weighted regressions (GWRs), this study successfully mitigates the endogeneity problem while addressing the heterogeneity problem.

Keywords: Flood risk; Hedonic price analysis; Endogeneity; Heterogeneity; Geographically-weighted regression with spatial fixed-effect (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.landusepol.2021.105443

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