Changes in Public Risk Perception after a Large Disaster: Evidence from the Housing Market

25 Pages Posted: 21 Oct 2019

See all articles by Shohei Yasuda

Shohei Yasuda

Keio University; Housing Research and Advancement Foundation of Japan

Michio Naoi

Keio University

Norifumi Yukutake

Nihon University - College of Economics

Date Written: October 10, 2019

Abstract

The unprecedented damage caused by the Great East Japan Earthquake and nuclear disaster greatly altered people’s awareness of risk not only in directly affected areas but also in unaffected areas as well. This study focuses on the relationship between earthquake risk and real estate prices in unaffected areas before and after the earthquake in order to explore how large-scale natural disasters influence people’s perception toward disaster risk. We use large-scale property transaction data covering periods both before and after the earthquake, together with the earthquake risk indexes by the Tokyo Metropolitan Government, to estimate a hedonic model. Our empirical findings are summarized as follows. First, we found that after the 2011 earthquake house prices are dropped more in relatively risky areas than in safer areas. In comparison, we could not find any evidence that housing rents are decreased more in risky areas as compared to safer areas. These results suggest that changes in risk perception are found for prospective homebuyers, rather than for tenants. Second, post-quake price drops are particularly eminent for properties built under the new earthquake resistance standards, those located on upper floors, and those with three- or more bedrooms. Third, we found that significant post-quake price discounts can be observed for three to five years following the earthquake, after which price levels return to their pre-quake baseline.

Keywords: hedonic analysis, earthquake risk, risk perception, housing market

JEL Classification: D83, Q54, R32

Suggested Citation

Yasuda, Shohei and Naoi, Michio and Yukutake, Norifumi, Changes in Public Risk Perception after a Large Disaster: Evidence from the Housing Market (October 10, 2019). Available at SSRN: https://ssrn.com/abstract=3467401 or http://dx.doi.org/10.2139/ssrn.3467401

Shohei Yasuda (Contact Author)

Keio University ( email )

2-15-45 Mita
Minato-ku
Tokyo, 108-8345
Japan

Housing Research and Advancement Foundation of Japan

6-3 Nibanchosankyo bldg.5th Floor
Nibancho
Chiyoda-ku, Tokyo 102-0084
Japan

Michio Naoi

Keio University ( email )

2-15-45 Mita
Minato-ku, Tokyo 108-8345
Japan

HOME PAGE: http://https://sites.google.com/site/michionaoi/

Norifumi Yukutake

Nihon University - College of Economics ( email )

Tokyo
Japan

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