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Living with Wildfire: The Impact of Historic Fires on Property Values in Kelowna, BC

Zhen Xu and Gerrit van Kooten

No 2013-05, Working Papers from University of Victoria, Department of Economics, Resource Economics and Policy Analysis Research Group

Abstract: Wildfires in British Columbia result not only in large direct damages, but also significant indirect losses associated with lost amenity values and the risk to life and property. The indirect values can potentially be measured by changes in property values. In this study, we assume that the threat of wildfire affects property values by shifting homebuyers’ willingness-to-pay. Using ten years of data from the City of Kelowna, we develop a hedonic pricing model that employs spatial autoregression to determine the marginal effects that wildfire occurrence, average fire size, and the location have on a residential property’s aggregate sales value ($) and on its per unit price ($/m2). Results indicate that historical wildfire occurrence has a statistically significant impact on property values, but that fire size has a more significant impact than frequency. It also appears that homebuyers discount the impact of fire on their purchase if large fires occurred nearby – as if fires do not strike twice in the same region. Finally, the evidence suggests that amenities available in the wildland urban interface add more value to residential properties than that is lost as a result of wildfire risk.

Keywords: Wildfire; Property Value; Hedonic Pricing Method; Spatial Autocorrelation (search for similar items in EconPapers)
JEL-codes: Q51 Q54 R31 (search for similar items in EconPapers)
Pages: 31 pages
Date: 2013-09
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http://web.uvic.ca/~repa/publications/REPA%20worki ... kingPaper2013-05.pdf Final version, 2013 (application/pdf)

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