Abstract
Recent major coastal disasters in the Asia-Pacific region have resulted in a massive loss of life and high societal costs. Unbridled development, growing coastal populations and injudicious land planning amplifies the predicted disaster risk due to climate change and extreme weather events. As it typifies expanding coastal development in areas prone to extreme weather events, the town of Exmouth (NW Australia) was used to investigate economic strategies for coastal risk mitigation. Recent marina development, with a loss of disaster mitigating ecosystem functions, has increased risk to previously unaffected areas. The extent to which risk perceptions of cyclonic storm-surge inundation and flooding influenced the price buyers paid for residential property in Exmouth over the period 1988–2013 was examined using a Hedonic Price Model. The analysis indicated that prices did not reflect the real societal cost of risk. Due to the absence of a monetary signal, such as higher insurance premiums, buyers tended to be risk insensitive and give greater weight to coastal amenity. To internalize these costs, a mandatory private insurance scheme for high-risk properties, penalties for local councils undertaking unsustainable developments, and a hybrid economic instrument aimed at correcting the market failure in coastal land, is proposed.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Similar content being viewed by others
References
Anselin L (1988) Spatial econometrics: methods and models. Kluwer Academic, Dordrecht
Australian Government, Prime Minister’s Office (Hon. Julia Gillard MP) (2011) Rebuilding after the floods. Media release, Press Office, Canberra, 27 January, http://www.pm.gov.au/press-office/rebuilding-after-floods.
Babcock M, Mitchell B (1980) Impact of flood hazard on residential property values in Galt (Cambridge), Ontario. Water Resour Bull 16(3):532–537
Bin O, Polasky S (2004) Effects of flood hazards on property values: evidence before and after hurricane floyd. Land Econ 80(4):490–500
Bin O, Kruse JB, Landry CE (2008) Flood hazards, insurance rates and amenities: evidence from the coastal housing market. J Risk Insur 75(1):63–82
Bowman Bishaw Gorham (1997) Exmouth marina, resort and residential development. Public environmental review, prepared for Landcorp, Perth.
Gujarati DN (2006) Essentials of econometrics. US Military Academy, West Point
Hallstrom DG, Smith VK (2005) Market responses to hurricanes. J Environ Econ Manage 50(3):541–561
Intergovernmental Panel on Climate Change (IPCC) (2007) Climate change 2007: the physical science basis. Contribution of working group I to the fourth assessment report of the intergovernmental panel on climate change. Cambridge University Press, Cambridge
Keskin B (2008) Hedonic analysis of price in the Istanbul housing market. Int J Strateg Prop Manage 12(2):125–138
Knutson TR (2011) Tropical cyclones and climate change. Extended abstract for GFDL/NOAA, http://yosemite.epa.gov/ee/epa/eerm.nsf/vwAN/EE-0566-103.pdf/$file/EE-0566-103.pdf
Kriesel W, Landry C (2004) Participation in the national flood insurance program: an empirical analysis for coastal properties. J Risk Insur 71(3):405–420
MacDonald DN, Murdoch JC, White HL (1987) Uncertain hazards, insurance and consumer choice: evidence from housing markets. Land Econ 63(4):361–371
MacDonald D, White H, Taube P, Huth WL (1990) Flood hazard pricing and insurance premium differentials: evidence from the housing market. J Risk Insur 57(4):654–663
Morgan A (2007) The impact of hurricane ivan on expected flood losses, perceived flood risk and property values. J Hous Res 16(1):47–60
Nakagawa M, Saito M, Yamaga H (2007) Earthquake risk and housing rents: evidence from the Tokyo metropolitan area. Reg Sci Urban Econ 37(1):87–99
Nakagawa M, Saito M, Yamaga H (2009) Earthquake risks and land prices: evidence from the Tokyo metropolitan area. Jpn Econ Rev 60(2):208–222
Pearson L, Tisdell C, Lisle A (2002) The impact of Noosa national park on surrounding property values: an application of the hedonic price method. Econ Anal Policy 32(2):155–171
Ray White Exmouth (2011) Ray White Exmouth. http://www.raywhiteexmouth.com/display/xml_listing/ressale. Accessed 22 Jan 2011
Roberts RS (2012) Economic strategies for coastal disaster risk-reduction: a case study of Exmouth, Western Australia. Unpublished PhD dissertation, Murdoch University, Perth, Western Australia
Rosen S (1974) Hedonic prices and implicit markets: product differentiation in pure competition. J Polit Econ 82(1):34–55
Skantz TR, Strickland TH (1987) House prices and a flood event: an empirical investigation of market efficiency. J Real Estate Res 2(2):75–83
Sydney Coastal Councils Group (2011) Quantifying the value of Sydney’s beaches. http://www.sydneycoastalcouncils.com.au/Project/Quantifying_Value_of_Sydney_Beaches
Taylor LO (2003) The hedonic method. In: Champ PA, Boyle KJ, Brown TC (eds) A primer on nonmarket valuation. Kluwer, Dordrecht, pp 331–393
Troy A, Romm J (2003) Assessing the price effects of flood hazard disclosure under the California natural hazard disclosure law. J Environ Plan Manage 47(1):137–162
Walk Score (2013) Walk Score. http://www.walkscore.com. Accessed 15 Jan 2011
Western Australian Government, Planning Commission (2013) State coastal planning policy guidelines. Western Australian Government, Perth
Western Australian Government, Planning Commission, Shire of Exmouth (2004) Exmouth townsite structure plan. Western Australian Government, Perth
Western Australian Government, Department of Water, Sinclair Knight Mercz (SKM) (2007) Floodplain management study. Unpublished report, accessed 12 Feb 2012
Author information
Authors and Affiliations
Corresponding author
Editor information
Editors and Affiliations
Rights and permissions
Copyright information
© 2015 Springer International Publishing Switzerland
About this chapter
Cite this chapter
Rebecca, R., Beckley, L.E., Tull, M. (2015). The Economic Value of Cyclonic Storm-Surge Risks: A Hedonic Case Study of Residential Property in Exmouth, Western Australia. In: Leal Filho, W. (eds) Climate Change in the Asia-Pacific Region. Climate Change Management. Springer, Cham. https://doi.org/10.1007/978-3-319-14938-7_9
Download citation
DOI: https://doi.org/10.1007/978-3-319-14938-7_9
Publisher Name: Springer, Cham
Print ISBN: 978-3-319-14937-0
Online ISBN: 978-3-319-14938-7
eBook Packages: Business and EconomicsEconomics and Finance (R0)