Earthquake Risk, Flooding Risk and Housing Prices: Evidence from Taichung, Taiwan

According to the World Bank, Taiwan ranks first in its exposure to natural hazards. We present an estimated hedonic price function that shows how differential exposure to earthquakes or flooding impacts housing prices in the Taichung metropolitan area. The 1999 Jiji earthquake affected the area, which also regularly experiences flooding due to typhoons. Geographically weighted regression estimates of implicit attribute prices show that housing in high-risk and medium-risk earthquake and flooding zones is associated with price discounts that reflect the higher risk of adverse events, especially in high-risk earthquake zones. Effects are comparable in magnitude to more frequently estimated neighbourhood attributes such as neighbourhood income or school quality.