Real Estate Pricing of Environmental Effects in the Face of Climate Change
This thesis studies how climate-related environmental effects, exacerbated by anthropogenic climate change, are capitalised into real estate. It investigates whether, where, and when climate risks are reflected in property prices and how these risks are shared among property owners, renters, insurers, and others. This is achieved through an extensive review of the literature, and the three empirical studies described below. The first study on house price changes in the Swiss Alps finds that house prices have increased significantly more in higher and colder ski resorts over the 2001-2019 period, but that no such relationship exists for places that see little or no winter tourism. This finding is ascribed to buyers’ desire for homes in places that are – and will remain – snow-secure in a warmer world. The second study investigate whether exposure to the climate-related natural hazards flooding, surface runoff, landslides, debris flow, and hillslope debris flow is associated with a rent-discount in Switzerland. A small but significant rent discount is found only for exposure to flooding. This suggests that there is a small discount for costs other than structural damage, and that tenants are able to pass on at least a part of these costs on to landlords, at least in the Swiss context. The third study, focussing on England’s east coast, shows that expected losses from coastal erosion are priced into property transaction prices for extremely long time spans of up to 250 years into the future. It reveals that discount rates decrease over longer time horizons, with a 2% net discount rate for a 100-year horizon, dropping to around 1.4% for 175-250 years. Additionally, it finds that even a low risk of flooding results in a significant price discount, with a higher discount in areas closer to the seashore.
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