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- Dokumenttyp:
- Masterarbeit
- Autor(en):
- Thesis
- Titel:
- Local Climate Risk and Real Estate Valuation
- Abstract:
- In recent decades, the United States has witnessed a surge in destructive natural hazards, a trend exacerbated by climate change. These events have exacted a heavy toll in terms of lives lost and extensive damage to infrastructure and properties. While empirical research on the impact of climate-related hazards on real estate pricing has seen growth, it remains an area requiring further investigation. This study endeavors to delve into the influence of climate-induced physical risks on property prices, employing the publicly accessible National Risk Index database furnished by the Federal Emergency Management Agency of the U.S. government as a primary source of risk data. In our analysis, we constructed a robust hedonic regression model, examining a sample of 1,062 multifamily property transactions involving U.S. REITs across 10 states from 2000 to 2020, sourced from the S&P Capital IQ Pro database. Hazard risk is assessed through the expected annual loss ratio associated with nine distinct climate hazards. To incorporate local property prices and living standards, we utilized the Zillow Home Value Index. Furthermore, we introduced an interaction term between the risk factor and the Zillow index to account for the interplay between natural amenity factors and the associated natural risk. Our findings yield significant insights. Firstly, we observe substantial reductions in property prices attributed to heightened climate risk. Factors contributing to this include the increased frequency and intensity of hazards, enhanced accessibility to risk information, and a growing public awareness. Secondly, our research points towards a foreseen escalation in the occurrence and magnitude of natural hazards, suggesting further price discounts in the future. Thirdly, we interpret our interaction term as representative of the influence of desirable amenities in areas with anticipated high natural risks, resulting in a price premium that outweighs the associated price discount. Incorporating climate risks into the real estate valuation process presents a complex challenge. This study offers valuable insights for a diverse range of stakeholders of the real estate industry, including appraisers, investors, insurance firms, international organizations, policy makers, the general public, and fellow researchers.
- Stichworte:
- Climate Change, Physical Risk, Hedonic Regression, Real Estate Pricing, Expected Annual Loss Ratio, FEMA, National Risk Index
- Jahr:
- 2023
- Sprache:
- en
- Hochschule / Universität:
- Technical University Munich
- Fakultät:
- TUM School of Engineering and Design
- TUM Einrichtung:
- Professur für Immobilienentwicklung
- Status:
- Abgeschlossen
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