Distressed property and spillover effect: A study of property price response to coastal flood risk

This paper presents evidence of distressed property spillover in coastal flood-prone areas. By utilizing a hedonic pricing model, this study may contribute to the global discussion on how property markets react to deterioration in coastal areas, specifically from the perspective of the Global South. Spillover effects in housing prices were observed through a spatial autoregressive model by investigating lags in price adjustment over time and space. The authors employed two large datasets comprising property information, including property tax history (n = 1933,037; 1993–2020) and real estate transactions (n = 1029; 2013–2020). These datasets are also recorded in the cadaster map of the Indonesian government. The property tax history provides crucial evidence regarding delinquent taxes, signifying distressed properties abandoned by their inhabitants. Property sales transaction data offers evidence of lowered prices and their spillover effects. As a result, this paper contends that neighborhood decay induced by coastal flooding represents a non-economic shock that permeates to the property market, leading to price movement. The most important finding is that land subsidence has a more significant influence than distressed properties on lowering prices and their spillover effects. These findings have the potential to initiate new discussions about environmental deterioration from a property market perspective. • Spillover in coastal flood-prone areas. • Hedonic Pricing Model. • Submarket for distressed properties. • Spatial autoregressive Model. • Developing countries.