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Who cares? Future sea-level-rise and house prices

Author

Listed:
  • Olga Filippova
  • Cuong Nguyen
  • Ilan Noy
  • Michael Rehm
Abstract
Globally, the single-most observable, predictable, and certain impact of climate change is sea level rise. Using a case study from the Kapiti Coast District in New Zealand, we pose a simple question: Do people factor in the warnings provided by scientists and governments about the risk of sea-level rise when making their investment decisions? We examine the single most important financial decision that most people make – purchasing a home, to see whether prices of coastal property change when more/less information becomes available about property-specific consequences of future sea level rise. The Kapiti Coast District Council published detailed projected erosion risk maps for the district’s coastline in 2012 and was forced to remove them by the courts in 2014. About 1,800 properties were affected. We estimate the impact of this information on home prices using data from all real estate transactions in the district with a difference-in-differences framework embedded in a hedonic pricing model. We find that the posting of this information had a very small and statistically insignificant impact on house prices, suggesting people do not care much about the long-term risks of sea-level rise as they do not incorporate these risks in their investment decisions.

Suggested Citation

  • Olga Filippova & Cuong Nguyen & Ilan Noy & Michael Rehm, 2019. "Who cares? Future sea-level-rise and house prices," CESifo Working Paper Series 7595, CESifo.
    • Handle: RePEc:ces:ceswps:_7595
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    References listed on IDEAS

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    Cited by:

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    3. Craig E. Landry & Dylan Turner & Tom Allen, 2022. "Hedonic property prices and coastal beach width," Applied Economic Perspectives and Policy, John Wiley & Sons, vol. 44(3), pages 1373-1392, September.
    4. Parton, Lee C. & Dundas, Steven J., 2020. "Fall in the sea, eventually? A green paradox in climate adaptation for coastal housing markets," Journal of Environmental Economics and Management, Elsevier, vol. 104(C).
    5. F. Marta L. Di Lascio & Ilan Noy & Selene Perazzini, 2022. "Modelling spatial correlation between earthquake insured losses in New Zealand: a mixed-effects analysis," BEMPS - Bozen Economics & Management Paper Series BEMPS98, Faculty of Economics and Management at the Free University of Bozen.
    6. Melissa Chow & Jordan Stanley, 2020. "A Shore Thing: Post-Hurricane Outcomes for Businesses in Coastal Areas," Working Papers 20-27, Center for Economic Studies, U.S. Census Bureau.
    7. Justin Contat & Carrie Hopkins & Luis Mejia & Matthew Suandi, 2024. "When climate meets real estate: A survey of the literature," Real Estate Economics, American Real Estate and Urban Economics Association, vol. 52(3), pages 618-659, May.
    8. Fang Wei & Lvwang Zhao, 2022. "The Effect of Flood Risk on Residential Land Prices," Land, MDPI, vol. 11(10), pages 1-18, September.
    9. Kevin T. Smiley & Ilan Noy & Michael F. Wehner & Dave Frame & Christopher C. Sampson & Oliver E. J. Wing, 2022. "Social inequalities in climate change-attributed impacts of Hurricane Harvey," Nature Communications, Nature, vol. 13(1), pages 1-10, December.
    10. Chen, Sicen & Liu, Siyi & Zhang, Junsheng & Zhang, Pengdong, 2023. "The effect of extreme rainfall on corporate financing policies," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 670-685.

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    More about this item

    Keywords

    house price; sea level rise; climate change; erosion;
    All these keywords.

    JEL classification:

    • Q54 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Environmental Economics - - - Climate; Natural Disasters and their Management; Global Warming
    • R38 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Real Estate Markets, Spatial Production Analysis, and Firm Location - - - Government Policy

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