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Inundation and Views in Coastal Residential Property Values. Does the Sale Price Reflect the Trade Off?

Alicia Rambaldi (), K. Renuka Ganegodage (), Cameron S. Fletcher () and Felix Lipkin ()
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K. Renuka Ganegodage: School of Economics, The University of Queensland,
Cameron S. Fletcher: CSIRO Ecosystem Sciences, PO Box 780, Atherton, QLD 4883, Australia
Felix Lipkin: CSIRO Ecosystem Sciences, PO Box 56, Highett, VIC, 3190, Australia

No 536, Discussion Papers Series from University of Queensland, School of Economics

Abstract: This study proposes a modeling approach to disentangle the discount due to flooding in residential properties that are located in coastal areas. The study makes three contributions. The first is to incorporate a continuous measure of flood risk in a study of coastal areas, as earlier studies modeled flood risk using a binary variable. The second is to estimate a discount over a three dimensional amenities’ set (degrees of view of the ocean, proximity to the ocean and proximity to other waterways), in order to provide a valuation of the trade o↵ between ’views/proximity’ and flooding. And, finally it is the first study of its kind for Australia. Data for two coastal sites in the state of Queensland, Australia are used in the study. The results indicate that the identification of a significant discount due to inundation risk is highly dependent on views and proximity to ocean and waterways, but the study demonstrates the methodology proposed here is able to disentangle statistically significant discounts due to inundation risk.

Keywords: hedonic models; spatial econometric models; inundation risk measures; pricing flooding risk (search for similar items in EconPapers)
JEL-codes: R11 R32 (search for similar items in EconPapers)
Date: 2014-12-11
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