Hydrogeological risk: effects on house prices
In Italy, a country with high hydrogeological risk, the link between flood hazard and the real estate market is still little explored. A new study by Politecnico di Milano, conducted by researcher Marco Rossitti from the Department of Architecture, Built Environment and Construction Engineering, fills this gap by analysing more than one million real estate ads in Lombardy.
The study, titled “Flood Risk Assessment and Resilience Characteristics in the Italian Real Estate Market,” was published on the SSRN platform as part of the Working Paper Series of the Center for Real Estate - Massachusetts Institute of Technology (MIT).
The research was partly conducted at the MIT Center for Real Estate, where Rossitti spent a visiting period thanks to the Rocca Project, a collaboration initiative between Politecnico and the Massachusetts Institute of Technology.
We decided to focus on flats, starting from the offer price, then estimating the market value of the property based on its intrinsic characteristics, such as surface area and floor number. We also considered its extrinsic features defined by adopting a GIS system, namely distances from public transport or the city centre, besides those specifically considered by the research, such as the distance from a river or a lake. The real estate market might actually appreciate this information, which could, however, increase the risk conditions.
Marco Rossitti, Professor of the Department of Architecture, Built Environment and Construction Engineering
The results show a slight but significant price reduction for properties located in risk areas, higher for units on lower floors and smaller for flats in good condition. The study also provides guidance for urban planning: designing lower floors differently or implementing risk mitigation measures can reduce the negative impact on prices, while avoiding social consequences related to housing accessibility.