Identifying the Information Effect of Flood Events: A Near-Miss Hedonic Approach

In this paper we identify the information effect of flooding on the price of near-miss properties using a difference-in-differences repeat-sales methodology. Our dataset contains information on over 12 million individual property transactions which is merged with GIS data identifying the spatial extent of all recorded flood events in England between 1995 and 2014 accounting for a total flooded area of 2,654 km2. This information allows us to identify the effect of floods on near-miss properties by looking at sales that occur in postcodes adjacent to the flooded area. Our results suggest that the effect of flooding on the price of near-miss properties is significant but differs in sign for inland and coastal flooding. This effect is, however, short lived. Based on evidence from behavioural studies on near-miss events we suggest that the opposite sign for inland and coastal properties is likely to reflect a different interpretation of near-miss information. In both cases however, prior experience of flooding is strongly associated with a negative near-miss effect.

Joint with Allan Beltrán, Robert Elliott.