Natural Disasters and Housing Prices: Fresh Evidence from a Global Country Sample

Abstract

Given that the literature on the impact of natural disasters on house prices is highly limited, this paper combines data on natural disasters and house prices from 117 countries, which span the period 2000-2018 and a panel regression method to estimate the effects of natural disasters on house prices. The findings document that natural disasters lead to lower house prices, with the results surviving a number of robustness tests. When examining the impacts of natural disasters by type, the findings highlight that geological disasters exert the strongest (negative) impact on house prices. The results also illustrate the negative impact of those disasters on house prices when also taking the distinction between small and large disasters into account. The findings provide important implications for policymakers and property investors. Lower house prices in countries that experience natural disasters events could significantly signify lower consumption and investment (the wealth effect), with further negative spillovers to the real economy. Economic policymakers could implement low-tax policies or quantitative easing schemes to support these areas/countries. The findings exemplify the need for governments and policymakers to mitigate climate change effects on housing by adopting new and more environmentally friendly technologies and energy sources.

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