Flood risk and buyer search behavior in Ho Chi Minh City

Abstract

Purpose: This study aims to investigate countries without national property insurance and see how experience affects behavior toward higher-risk flood prone property. Design/methodology/approach: Using a unique data set that captures the flood experiences of homeowners that search for new housing, the authors examine the premiums or discounts of such experience on homes at risk. The authors use hedonic property modeling to estimate the effects of experience on values. Findings: The authors find that such experiences play a strong role in convincing buyers of the real risks imposed by climate change and sea level rise and the authors expect these demand-side behavioral changes to persist. This finding is unlike more developed markets where insurance may be subsidized and negative effects on value dissipate within a few years. Research limitations/implications: The world is starting to pay more attention to climate risk and the results in developed countries have been biased by the extensive insurance provided by the government or emergency funding. Practical implications: Providing market transparency on climate risks will result in permanent market effects, if not otherwise subsidized. Social implications: The governments should encourage market disclosure. Originality/value: No one has ever had a data set like this before where the authors get to observe the behavior of those already experiencing property losses from flooding.