How flood risk information affects property transaction values

What is it about?

To what extent do individuals perceive and price flood risk in real estate transactions? We identify the effect of flood risk information by exploiting the different dates of release of regulatory flood risk maps in the suburbs around Paris during the period 2003-2012. This provides a unique setting to isolate the effect of flood risk information, as there had been no major flood in the region since 1955, nor was there any impact on the cost of flood risk insurance.

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Photo by Nicolas HIPPERT on Unsplash

Photo by Nicolas HIPPERT on Unsplash

Why is it important?

We use very detailed data on property transactions with their geocoded location, which allows us to precisely locate them inside or outside the flood risk zones that were implemented around Paris in the early 2000's. Using a stacked design we identify the effects of flood risk information in a context where there are no confounding effects of flood damage or changes in insurance premiums. We find substantial effects of such information, ranging from 3-7 %, and importantly, the effect persists at least over the time period we study.