The impact of flood risk on the price of residential properties: the case of England

Abstract

This paper examines the impact of flood risk on the value of English residential properties. We find that a location within a flood zone significantly lowers property values even if we control for the proximity to a watercourse, the history of flooding and neighbourhoods effects. Although the flood risk discount is more compelling for waterfront properties, it is still highly significant for dwellings further from the water. The markdown arises around 2004–2005, which coincides with the publication of detailed flood maps by the UK Environment Agency and with a more risk-based pricing of flood insurance policies. As expected, the effect of flood risk on house prices is stronger in the months following major flood events but, interestingly, it almost disappears in a hot market when buyers have arguably less negotiating power.