Waterside properties – the financial ups and downs.

The question : ‘If your house is at risk of flooding, does that make it worth less?’ – has been answered by investigators at the Department of Economics, East Carolina University, US. The research team used a Semiparametric Hedonic Price Function Model combined with Geographic Information System data on National Flood Insurance Program flood zones to evaluate hazards in the coastal housing market of Carteret County, North Carolina. The results were clearcut :

“[…] location within a flood zone lowers property value.“

The team’s paper was presented in the March 2008 issue of the Journal of Risk & Insurance.

Before jumping (in)to any financially-significant conclusions though, property owners and potential buyers might like to see a previous study – from the same (lead) author, Profesor Okmyung Bin. Back in 2005, he carried out a somewhat related research project – again examining the effects of proximity to water (in particular open water wetlands) on property values.

“The results indicate that proximity to open water wetlands has a positive association with property values […]“

See: A semiparametric hedonic model for valuing wetlands in: Applied Economics Letters, Volume 12, Issue 10.

[The illustration depicts the devatating Burchardi flood of 1634.]