Underestimating the impact of floods? Evidence from housing choice behaviour in HCMC

Abstract

The impact of flooding on different demographic groups varies significantly, making it essential to measure the effects of flooding on these groups comprehensively. This study aims to measure the impact of flooding on various demographic groups, such as the poorer versus the richer, and those who have versus those who have not previously lived in flood-prone areas. Additionally, it examines the differences in the housing choices of these groups. Using survey data from individual home buyers in Ho Chi Minh City from the third quarter of 2017 to the end of the second quarter of 2018, the study reveals several key findings. Overall, flooding has a significantly negative impact on house prices. Interestingly, the extent of this price reduction does not differ significantly among different buyer groups. This uniformity in price reduction makes flood-affected homes more attractive to financially constrained buyers because the homes they purchase are typically in lower price ranges, leading to a higher percentage of price reduction. Consequently, this trend attracts them to higher flood risk areas. However, buyers who have previously lived in flood-prone areas exhibit different behavior. Despite financial constraints, these buyers tend to purchase new homes in non-flood areas. This behavior suggests that prior experience with flooding makes these buyers more cautious and likely to avoid flood-prone areas, even if it means stretching their finances. This indicates a scenario where the public might be underestimating the impact of flooding due to a lack of information or awareness. The findings underscore the importance of disseminating accurate information about the risks and impacts of flooding to ensure that all demographic groups can make informed decisions regarding their housing choices. This study highlights the nuanced ways in which flooding influences housing markets and the varying adaptive behaviors of different demographic groups.