Flooding does not permanently impair property prices

Allan Beltran, David Maddison and Robert Elliott, “Flooding does not permanently impair property prices”, Sustainable Future Policy Lab: Analyses, 2020-001.

Continuous housing development on floodplains and the expected increase in flooding due to climate change mean that it is important to understand the longer term implications of flooding for households. A particular fear expressed by many homeowners is that once a property has been flooded there may be a permanent reduction in its value. If true this would also present a challenge for policy-makers seeking to protect households from a sharp reduction in the price of their most valuable asset.

In a recently published paper “The impact of flooding on property prices: a repeat sales approach”, which appears in the Journal of Environmental Economics and Management, researchers from Birmingham Business School analysed the immediate impact on and the subsequent recovery of the price of inundated properties. In the largest study of its type ever undertaken they used information on over 12 million individual property transactions and considered the impact of all recorded flood events occurring in England over a 20 year period.

Results suggest that for the typical property affected by inland flooding for the first time and not protected by flood defences the immediate price discount is between -18.4% and -27.9%. Regarding the persistence of the post-flood discount however, the results suggest that after 6-7 years the price discount has all but disappeared for property in the lowest price-quartile. The price discount from flooding disappears even faster for property in the highest price-quartile.

This means that only homeowners who sell their property shortly after a flood are likely to be affected by a decrease in the value of their property. Other losses sustained by households following a flood event will be in the form of uninsured or intangible damages.

David Maddison who co-authored the paper says: “These findings might provide a crumb of comfort for those currently affected by flooding”.

This research forms part of a series of papers written by Dr. Allan Beltran, Professor David Maddison and Professor Robert Elliott that examine different aspects of the economics of flooding.

Cite as
Allan Beltran, David Maddison and Robert Elliott, “Flooding does not permanently impair property prices”, Sustainable Future Policy Lab: Analyses, 2020-001.

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