How Does Residential Property Market React to Flood Risk in Flood-Prone Regions? A Case Study in Nagoya City

Abstract

To quantify the flood risk awareness of real estate market participants and residents, previous studies analyzed the effect of flood risks on residential property values. However, most studies focused on the impact of recent flood events and the publication of new flood risk information; the behavior in flood-prone regions in which repeated damages occurred and lessons learned consequently has not been the focus of analysis. Moreover, there is a growing national concern in Japan about an increase in future flood risks due to climate change, although their effect on property values has not been discussed. In this study, we analyzed residential property values in Nagoya City (Aichi Prefecture, Japan), a megacity that has experienced significant flood damage in major historical and recent floods. The main objective of this study is to determine the effects of past and recent flood experiences and the increasing concerns about flood risks on recent residential property values. The results revealed that historical flood damage had the largest impact on residential property values in Nagoya City, and devaluation increased due to growing concerns about natural disasters in Japan. The disclosure of flood risk information also had an impact on property values, increasing devaluation after disclosure. On the contrary, the occurrence of recent floods did not have an impact on property values, suggesting that flood risk awareness had already been strong in the target area. These findings are different from those of many previous studies. The observed trends in residential property values in the target area are likely a characteristic response in flood-prone regions, where flood risk awareness is enhanced due to repeated flood damage.

Public Attitudes Toward Policy Instruments for Flood Risk Management

“…Participants in this study clearly indicated that they want access to flood risk information in the form of flood maps and mandatory property disclosure concerning flood risk. The fact that these respondents support these tools, despite living in designated flood risk areas, appears to challenge the notion in previous scholarship that homeowners will resist the release of this information out of fear of the potential consequences to their home value (e.g., Bakos et al 2022 ; Inoue and Hatori 2021 ).…”

“…On the other hand, adoption of this instrument set would place new controls on real estate transactions that the public might perceive as intrusive. Moreover, disclosure of flood risk information is often perceived to have negative impacts on property values (Inoue and Hatori 2021 ; Votsis and Perrels 2016 ) and liability is difficult to discern due to uncertainty around the causes and timing of flooding.…”

Flood hazards and housing prices: a spatial regression analysis for Hat Yai, Songkhla, Thailand

“…The second method compares housing prices before and after a flood (Miller and Pinter, 2022;Atreya and Ferreira, 2015). However, Inoue and Hatori (2021) find that the occurrence of new floods does not affect the prices of houses located in frequently flooded areas because the price already incorporates flood conditions. Therefore, we choose the last method for our study -HPM.…”