Estimating the Impact of Floods on House Prices: An Application to the 2005 Carlisle Flood

Gwilym Pryce and Yu Chen

ERES from European Real Estate Society (ERES)

Abstract: It is estimated that two million properties and five million people are located in areas at flood risk in England and Wales, with nearly 100,000 homes and businesses at risk of flooding in Scotland. These numbers are anticipated to rise significantly as a result of climate change which the IPCC and UKCIP estimate will cause increased winter precipitation, rising sea levels, and greater frequency and prevalence of storm surges and extreme weather events. This paper explores how the housing market responds to such intensifying flood risk. In particular, we model the impact of flooding on house prices. This is an important effect to consider because the maintenance of property values matters for both individual home owners and community as a whole. House prices are also a gauge of human wellbeing (holding constant property attributes). Whilst the existing literature focuses on empirical studies of the effects of flooding on house prices, primarily drawing on data from the USA, there is a dearth of research grounded in sound economic theory and robust econometrics, particularly in the UK context. This paper seeks to address some of these shortcomings using UK data.

JEL-codes: R3 (search for similar items in EconPapers)
Date: 2009-01-01
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