Flood risk and property value: A case study analysing the effect of disclosed flood risk maps on the housing market in Hamilton, New Zealand

Abstract

Flooding is among the most financially devastating natural disasters globally and in New Zealand. To manage flood risk, educating the public about its potential dangers is widely recognised as a necessity worldwide. However, in New Zealand, building development and property sales continue to thrive in officially designated flood risk areas, suggesting that published flood risk information may not be achieving its intended impact. This raises alarming concerns about whether the public effectively receives published flood risk information and to what extent it influences their decision making. However, empirical research on this topic is scarce in New Zealand, and the few existing studies only cover small portions of a case study area, lacking broader geographical representation and transferrable insights into long-term behavioural responses to flood risk information. This leaves local governments without reliable evidence to assess the effectiveness of flood risk disclosures and informed land-use decisions. One of the key reasons is the lack of nationally consistent flood risk mapping and the fragmented flood risk management approach across localities and regions, making flood risk information scattered, inconsistent, and difficult to access. This research aims to address this gap by conducting a comprehensive empirical analysis in Hamilton City, New Zealand. Specifically, I focus on the holistic timeline of flood risk information released within the city since the first flood map was officially adopted in 2012. Specifically, Hamilton City Council (HCC) released flood risk maps and adopted them in the 2012 District Plan, followed by the introduction of online Floodviewer maps in 2020. Publishing flood risk information through two different platforms covering various urban spaces makes this a unique case study for examining the effects of flood risk on property prices. This research combines rigorous causal inference methods, including Difference-in-Differences (DID), Repeat-Sales models, and Hedonic modelling, to examine whether the release of flood risk information influences property sales in officially designated flood zones. The Results show that flood risk information has a limited impact on property prices in Hamilton City’s flood risk areas. However, in repeat sales analysis, disclosing flood risk information positively impacts housing value in these areas. These findings align with most historical research in New Zealand, indicating that it is not rare for people to disregard flood risk information in this country. This may be attributed to the absence of a unified national standard for published flood risk information and the lack of effective communication mechanisms.