Wednesday, September 28, 2005

After the Flood

What is the effect of flooding on real estate prices? What would happen to property values if a natural disaster like Hurricane Katrina caused floods in a large Japanese city? Well, an interesting paper by Kyoto University’s Guofang Zhai in looks at the effect of the Tokai flood in Nagoya in 2000.

Unsurprisingly, decreases in land prices correlate with the extent of flooding. The greater the inundation, the greater the fall. However, decreases also correlate with the land’s original price: the higher the price, the stronger the impact. Commercial land was demonstrated to be more prone to price decreases due to flooding than industrial or residential land. Interestingly, the statistics show that the decrease did not occur immediately, but amplified over a period of two years.

Further thoughts - three places in Nagoya recorded the highest increases nationwide this year, with one point recording more than a 30% spike. I wonder if they remember the Flood of 2000?

Japan Real Estate Blog

Tags : japan, real estate, property, investment, 不動産


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