Flood Risk as a Price-setting Factor in The Market Value of Real Property

CUPAL, Martin. Flood Risk as a Price-setting Factor in The Market Value of Real Property. Online. In Iacob, AI. Procedia Economics and Finance. 23rd ed. Amsterdam: Elsevier, 2015, p. 658-664. ISSN 2212-5671. Available from: https://dx.doi.org/10.1016/S2212-5671(15)00447-5.

Basic information

• Original name: Flood Risk as a Price-setting Factor in The Market Value of Real Property
• Authors: CUPAL, Martin.
• Edition: 23. vyd. Amsterdam, Procedia Economics and Finance, p. 658-664, 7 pp. 2015.
• Publisher: Elsevier

Other information

• Original language: English
• Type of outcome: Proceedings paper
• Field of Study: 50200 5.2 Economics and Business
• Country of publisher: Netherlands
• Confidentiality degree: is not subject to a state or trade secret
• Publication form: electronic version available online
• Organization unit: Faculty of Economics and Administration
• ISSN: 2212-5671
• Doi: http://dx.doi.org/10.1016/S2212-5671(15)00447-5
• Keywords in English: Market value; real estate; linear regression model; price-setting factor; flood risk
• Tags: International impact, Reviewed

Abstract

Currently, flood risk can be considered as the most serious threat, mainly in areas and countries where hardly any other natural risks occur. In relation to the field of valuation and insurance, flood risk represents a significant factor entering the new valuation procedures as well as binding regulations for real property valuation. The main objective of the research was to determine whether flood risk could be considered as a price-setting factor in market price of a real estate. If so, then it would be possible to start considering it in real estate valuation methods. Statistical methods of multiple linear regression model and statistical hypothesis testing, particularly statistical signification of regression parameter representing flood risk were employed in the research. The research was performed on the housing segment of the Czech real estate market. The paper presents an estimated model with a modified set of parameters that can be used to determine the market price of a house and also determine the degree of influence factor the flood risk may have on the final market price.