Implications of Rising Flood Risk for Residential Real Estate Prices and the Location of Employment

Flood risks are forecast to rise significantly across many parts of Europe, USA, and Asia. As the climate warms, sea levels will continue to rise and the water holding capacity of the atmosphere will increase exponentially. At the same time, the cost of building flood barriers will increase disproportionately with every additional centimetre of height. For many countries, these flood risks will be highly localised, however, and with strong spatial spillovers. This paper uses a unique dataset for 5 boroughs in London to develop a spatial econometric simulation model of the impacts of current and future flood risks on house prices and the location of employment. We consider the broader socio-economic implications of our results.