Impact of Flood Risk on House Prices: Evidence from Vietnam

Abstract

Rising sea levels are threatening populations that live in shoreline cities. The southern section of Ho Chi Minh City (HCMC), Vietnam is a newly established urban area in which lively real estate transactions are taking place. However, certain sections of the area are frequently put under the threat of inundation. Spatial econometric models were applied to analyse residential property asking prices, as advertised, within the southern region of HCMC to examine the effect of flood risk on residential property asking prices. Asking prices for flood-prone properties were supposed to be discounted compared to the non-flooded ones. Causes of price reduction that were studied are flood risk awareness, the impact of a large flood event, and constant exposure to floods. This research contributes to the existing literature as follows. First, the effect of pluvial flood risk is found similar to that of large and irregular floods, which have been the focus of earlier studies. Second, the inclusion of legal status as a control variable accounts for the characteristic of the Vietnamese housing market. Third, several cultural differences between the Vietnamese and Westerners' way of purchasing properties are examined.