Does Hazard Information Reduce Property Value?: The Case of Seoul, Korea

Abstract

Climate change has increased extreme weather and make people to perceive the risk of natural disasters more seriously. Especially, with urbanization, flash flood has become one of the most frequent natural disasters, damaging properties in urban areas. Disaster awareness and self-protective behavior are one of the mitigation strategies to minimize the inundation damage from the flood. However, people tend to underestimate vulnerability of their neighborhood due to the lack of objective hazard information. For this reason, public authorities should communicate the flood risk with people. One of the representative public risk communication efforts is to provide hazard map. Nevertheless, it is not easy to open hazard information to the public because the disclosure of the hazard map may have a negative effect on property values. Many studies prove that housing values decrease after a disaster occur, but little study explore the disclosure effect of disaster risk on property values. Thus, this study examines whether the disclosure of inundation hazard map affects property values with a case of Seoul, Korea. Despite of the concern on the negative effect of opening hazard map, Seoul city uploaded the flood hazard map on its website in September 2014. In order to identify this disclosure effect, this study applies the hedonic price model with a difference-in-difference method using the sale data from 2010 to 2016. We found that the flood hazard map has little disclosure effect on the property values when it is provided on the web site. It implies that either flood premium is already reflected in housing price due to the past experience of flood or it is too passive public risk communication efforts to make people perceive the risk objectively. The findings of this study could support policy makers’ decision about opening the hazard information.