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Flood risk and housing prices: evidence from Hungary

Gábor Békés, Áron Horváth () and Zoltan Sapi ()
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Zoltan Sapi: Institute of Economics - Centre for Economic and Regional Studies, Hungarian Academy of Sciences and ELTINGA Centre for Real Estate Research

No 1620, IEHAS Discussion Papers from Institute of Economics, Centre for Economic and Regional Studies, Hungarian Academy of Sciences

Abstract: This study employs the hedonic property price method to analyze the flood risk effect on a rich set of data. The analysis is carried out on Hungary, but as the control variables are extremely elaborated, our results have general importance. The paper finds a significant reduction in housing prices accounted to ZIP code level flood risk even after controlling for a wide range of geographical and socio-economic features. This paper finds that flood risk reduces housing prices substantially. It turns out that the average elasticity is driven by being in close proximity of major rivers. While riverside areas have an overall price premium in Hungary, risky areas loose this advantage to flood risk. In ZIP code areas where the inundation depths are 10% higher, housing prices tend to be 1% lower on average plus another 1% lower along the major rivers.

Keywords: housing; hedonic pricing; flood risk; geography (search for similar items in EconPapers)
JEL-codes: Q51 Q54 R30 R31 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-geo and nep-ure
Date: 2016-06
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Persistent link: https://EconPapers.repec.org/RePEc:has:discpr:1620

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