Real Estate Resilience: Unveiling Seismic Preferences through Real Estate Prices in Lisbon, Portugal

The capital city of Portugal, Lisbon, has a history of suffering from seismic events. However, around 27.3% of the residential buildings in the Lisbon Metropolitan Area were constructed before the implementation of any seismic regulations. This percentage increases to 63.9% when considering residential buildings within Lisbon's municipality alone. Despite the known risk, there has been a recent upsurge in real estate prices in Lisbon. In the last decade, the market has registered an unprecedented growth. It is unclear how the pricing mechanisms for real estate incorporate the risk exposure to seismic events. Using a large data set with over 8,000 property sales from 2008 to 2018, this study aims to explore whether market values reflect a preference for properties less vulnerable to earthquakes. To this end, the study included a comprehensive methodology accounting for building stock, ground motion, spatial considerations, and economic considerations. A fixed-effects regression was used with different levels of data aggregation. Based on the analysis of the literature and the results, it can be concluded that the market does not necessarily reflect a preference for properties less vulnerable to earthquakes. The results show that the market reflects a preference for newer or renovated buildings, which may present less vulnerability, driven not by the concern of safety itself but by the amenities offered the property, namely its condition and the proximity to high-value locations properties less vulnerable to earthquakes.