The Impact of Flood Risk on the Price of Residential Properties: The Case of England Philippe Bélanger & Michael Bourdeau-Brien 1 Department of Finance, Insurance and Real Estate, Université Laval Email:
[email protected] [email protected] Areas / Paper type – Change and Risk - Issues for Property Valuation work? ABSTRACT This paper examines the impact of flood risk on the value of England residential properties. We find that being located within a flood zone significantly lowers property values once we control for the proximity to a watercourse that often increases house prices. Interestingly, the effect of flood risk is predominantly associated with the post-2003 period which can be rationalized by changes in insurance practices and availability of detailed information on flood zones. Moreover, people in richer areas appear to better incorporate available flood risk data while people in poorer areas seem to associate flood risk with proximity to the water. Keywords: Floods; Real Estate; Housing; Household behaviour JEL Classification: D12, H31, Q54, R31 Proceedings: ERES2016 pp. xx-xx 1. Introduction Change and Risk - Issues for Property Valuation Floods and other major natural hazards have a far-reaching impact on the economies of work? affected regions. According to a 2015 study from the United Nations’ Food and Agriculture Organization1, natural disasters caused more than $1.5 trillion in damage 2 and 1.1 million deaths worldwide between 2003 and 2013. These numbers may yet get worse because of global warming that tends to increase the frequency and intensity of extreme weather events (Francis and Vavrus, 2012, Rahmstorf and Coumou, 2011, Douglas et al., 2010, Kazmierczak and Bichard, 2010, Thorne et al., 2007).