A new study conducted in the UBC Sauder School of Business at the University of British Columbia, investigates on the impact of climate change in buildings' prices. The fundamental concept is that real estate prices should decrease in regions that will be highly affected by the water-level rise in the future.
According to scientists, 2% of residences in the United States could end up to be below the water level by 2100. Remarkably, in coastal regions such as Hawaii and Florida the proportions increase to 10-12%. This would result in a financial loss of about $882 billion.
Nowadays, big cities of the U.S. including Los Angeles, New York and Miami have already been affected by climate change. Heatwaves and droughts are more intense and wildfire incidents increase poses a severe threat to infrastructure.
The research team used data about sea-water level change deriving from NOAA (National Oceanic and Atmospheric Administration), information about real estate business from Zillow, a U.S. online real estate database company, and climate change data from a Yale Program on climate change communication. After considering all potential factors, they concluded that the prices depend on whether people believe in climate change or not.
In particular, the found out that those residences that will be underwater in the future (according to current prediction models), were sold for 7% more in “denier” than in “believer” neighborhoods. "Denier" neighborhoods represent people that believe less in climate change than the average while "believer" neighborhoods those who believe that climate change and sea-water level rise is indeed a real phenomenon.
“If everyone were to say, ‘I'm not buying beachfront property here because it's going to get flooded,’ then prices would collapse. But if you don't believe in climate change, you might say, 'You guys are crazy. Climate change isn't a real thing, so I see a buying opportunity,’” Markus Baldauf, lead author of the study and Assistant Professor at UBC Sauder School of Business, University of British Columbia, stated.
The study focused on the United States and Prof. Baldauf explained that the situation may be different in Europe or in Canada where climate change is generally more admissible. Within the U.S., the study shows that people on the west coast are more "believers" of climate change than those in the east coast and particularly in Florida.
Prof. Baldauf also emphasizes on the fact that climate change is an unprecedented phenomenon and how the real estate market will respond in the future is highly debatable.
Source: UBC Sauder School of Business
