How extreme weather sinks housing market? Evidence from the 2021 Henan heavy rainfall in China

Purpose As global warming intensifies natural disasters, this study aims to investigate the socioeconomic impacts of extreme rainfall. Using the “720” rainstorm that struck Henan in 2021 as a quasi-natural experiment, this research seeks to address gaps in the existing analysis concerning developing regions and the underlying transmission mechanisms. Design/methodology/approach Using 36 months of housing price data from 287 Chinese cities, the author uses a Difference-in-Differences (DiD) design. Areas affected by extreme rainfall are designated as the treatment group, while unaffected areas serve as the control. The DiD design compares changes in housing prices before and after the event between these two groups. Findings A key finding is that extreme rainfall caused a 2.78% relative drop in the housing prices of affected areas, a result robust to various tests. Notably, the provincial capital Zhengzhou saw a smaller decline, reflecting its stronger market resilience. The negative impact peaked shortly after the disaster and then eased as confidence rebounded. This price depression was driven by a drop in demand, due to the twin channels of physical property damage and diminished buyer sentiment. Originality/value This study enriches developing economy research, fills literature gaps on extreme rainfall and housing markets and identifies transmission channels, offering empirical insights for climate risk mitigation in real estate.