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The impact of flooding on real estate transactions in densely populated areas: Evidence from the 2019 typhoon hagibis in Japan

Ikuto Aiba,Daisuke Hasegawa

Published 2025 in Journal of the Japanese and international economies (Print)

ABSTRACT

We examine the impact of flooding on real estate transactions in an urban area, using as a natural experiment the flooding caused by Typhoon Hagibis, which hit Japan in October 2019. Applying the difference-in-differences method, we find that the properties located in the inundated areas experienced significant declines in contract and offer prices by about 6.4% and 5.9% on average, respectively, indicating that discount rate, defined as a percentage change from offer to contract prices, became larger by about 0.5 percentage points. Focusing on transactions of apartments, we show that the negative effects are significant for higher floors, whereas insignificant for lower floors. This suggests a possibility of buyers becoming more aware that higher floors are also vulnerable to flooding because of the risks of power and water outages. It is also revealed that the negative effects on detached houses are more serious and appear more slowly than those on apartments.

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