Does Flooding Affect Property Values?

Flooding causes more damage worldwide than any other natural disaster, with major floods causing 6 billion dollars in property damage. Furthermore, floods are also becoming more common, due to factors such as global warming. Another reason for increased flooding is that as the population grows, and space becomes limited, more people are settling in flood plains that might have otherwise been avoided. In addition to lack of space, floodplains are often attractive to people due to the proximity of water, which is useful for everything from entertainment, to power supply. Unfortunately, this leads to an increased risk of people experiencing damage to their home due to flooding. The question is, does flooding affect the value of your home?

Determining the affects of flooding is more complicated than it might seem as it can be analyzed multiple ways. The first thing to consider is location. Is a home located in a known floodplain going to have a lower value than one located outside the floodplain? A research study in Boulder, Colorado examined the aftereffects of a severe flood in September 2013. The average sales price of homes were compared between 2009-2014 (before and after the flood). Surprisingly, the mean price of home inside the floodplain was consistently higher than the homes outside of it. Homes located inside the flood plains were an average of 8.25% higher.

The same research study also examined Ljubljana, Slovenia. Ljubljana, a city that has experienced major flooding on a consistent basis, was studied based on a flood that took place in September 2010. The average prices were studied between 2008-2014 for homes both inside and outside the floodplain. In the case of Slovenia, the average prices were higher outside the floodplains.

The most obvious affect of flooding is the damage to your home after a flood occurs. Does past flood damage negatively affect the value? Home prices were studied over a 4 year period, in Des Planes, Illinois, which is a suburb of Chicago. Two floods occurred during this time period. After the first flood, prices of the flooded homes, increased slightly. The 8% increase is most likely due to the new improvements made necessary by the flooding. At the same time, non-flooded homes, slightly decreased in price. The second flood that occurred was not as damaging, thus not as many repairs were needed. This flood led to decreases in both flooded and non-flooded homes.

This brings up the question, are the depressed sales permanent or do they bounce back? A study was conducted in Paeroa, New Zealand regarding record flooding in 1981. The results showed that after 4 years, homes that were flooded were valued higher than prior to the flood. In fact, the renovations that were needed because of the flooding helped the homes have a perceived higher value. During the initial period after the flood, homes in the non-flood plain were significantly higher, however, once four years had passed, the prices returned to normal range. In Te Aroha, New Zealand, after a 1985 flood, all prices decreased, both flood plain and non flood plain areas. The price depression lasted about 4 years.

Another aspect that could affect home value is history. Does the knowledge that a flood occurred in the area in the past lower values in the future? While the flooding didn’t appear to affect the prices in Boulder, Colorado, it may have negatively impacted the number of people wanting to live in the area. In 2013, there were 989 home sales (both inside and outside the floodplain). After the flood occurred in September 2013, the number of sales dropped approximately 52%.

A case study in Oregon also showed that a flood event can decrease property values for a period of time after a flood occurrence. In this case, a major flood in 1964 decreased the property values for 5-8 years. Interestingly, the study also showed that an actual flood event has a more harmful effect that a flood plain designation. Lots that were designated in the flood plain increased more rapidly than those that were not.

As you can see, many studies have been completed on the effects of flooding on a home’s price value. The general consensus is that immediately after a flood, flooded homes will experience a decrease in pricing, while non flooded homes will increase slightly. This dynamic will switch, once the flooded homes have been repaired. At that point, the flooded home value will increase more significantly than the non-flooded homes. It would appear that as long as a home is dried out properly, and the needed repairs are completed, then a flood is not harmful to a home’s property value. Keep in mind, that this doesn’t mean the homeowner will make more on the sale of the home, as the cost of the repairs must be factored in, as well. When it comes to location, floodplain versus non-floodplain isn't necessarily a factor. Homes in designated floodplains are often considered more desirable despite their location. It would appear that a recent flood would be more likely to detract buyers.

Aliyu, Ahmad, Habu Mallam Baba, and Maryam Salihu Muhammad. IMPACT OF FLOODING ON RESIDENTIAL PROPERTY VALUES: A REVIEW AND ANALYSIS OF PREVIOUS STUDIES. Proceedings of the Academic Conference of Nightingale Publications & Research International on Sustainable Development, May 2016. Web. Aug. 2017.
Rangel, Miguel Angel, Trejo, Klaudija Sapac, and Mitja Brilly. Analysis of the impact of flood events on the real estate market in two case studies – Ljubljana, Slovenia, and Boulder, Colorado, USA. Thesis. Erasmus Mundus Flood Risk Management master programme, 2017. N.p.