Unveiling housing preferences amidst flood risks: an empirical study in an emerging market

Abstract

Purpose This study investigates the interplay between flood risk, financial constraints, and buyer behavior in the housing market. It aims to discern how flood experience influences housing choices, particularly among financially constrained buyers. Design/methodology/approach Using hedonic pricing models and probit analysis, this research examines the implicit prices of house characteristics and evaluates the determinants of housing choices, considering factors such as flood risk, financial status, and past flood experience. Findings The study underscores that lower house prices incentivize buyers to opt for homes in flood-prone areas, thereby increasing their vulnerability to flood risks. Consequently, financial constraints exacerbate this situation, compelling low-income buyers to accept higher flood risks. However, flood experience fosters risk awareness among buyers, encouraging them to steer clear of flood-prone areas, albeit with lesser efficacy among financially constrained individuals. Originality/value This research contributes to the understanding of how flood risk and financial limitations shape housing decisions. It highlights the role of flood experience in influencing buyer behavior and emphasizes the need for targeted policies to mitigate flood-related risks in the housing market, particularly among economically vulnerable populations.