Flood prone risk and amenity values: a spatial hedonic analysis

This study examines the impact of flood hazard zone location on residential property values. The study utilises data from over 2,000 private residential property sales occurred during 2006 in North Shore City, New Zealand. A spatial autoregressive hedonic model is developed to provide efficient estimates of the marginal effect of flood prone risks on property values. Our results suggest that a property located within a flood hazard zone sells for 4.3% less than an equivalent property located outside the flood hazard zone. Given the median house price, estimated discount associated with flood risks is approximately NZ$22,000.