Risk Perception and Property Value: Evidence from Tianjin Port Explosion

Yaoxuan Huang,Cong Liang,Tsz Leung Yip

doi:10.3390/su12031169

Abstract

This paper aims to investigate the perceived risk after the Tianjin port explosion event and its impact on property value. In addition to focusing on the relationship between homebuyers’ risk perception and property sales price, this paper also considers the risk perception of property sellers via the sale-to-list ratio. By using the difference-in-differences method and the sample from the property agent, we found that the explosion event generated a long-time effect on the public and property market in the city of Tianjin. Relative to those properties far away from the explosion site, the sales price and the sale-to-list ratio of the property near the explosion site were detected to have significant drops for the first six months after the explosion event. The temporal decrease of the relative sales price and the sale-to-list ratio are the evidence of short period overreaction from the public, which decays over time. This study demonstrates an indirect method to estimate the perceived risk of the general public and provides valuable insight into sustainable port management policies.

Highlights

The occurrence of two massive explosions in the port of Tianjin city in China on 12 August 2015 is an unprecedented tragedy
The dynamic treatment effect move as an uprising trend and even climb up to a positive level. These findings suggest that home buyers are unwilling to/fear living within 5 km of the explosion site as they are worried about the unknown toxic chemical materials that penetrated in the soil and water of the Tianjin port explosion site in the first half-year after the explosion event
This paper aimed to investigate the impact of the Tianjin port explosion on the risk perception of the public, where the willingness to pay for the property is used as an indicator to measure the public’s risk perception

Summary

Introduction

The occurrence of two massive explosions in the port of Tianjin city in China on 12 August 2015 is an unprecedented tragedy. The explosion led to 173 people dead, 8 missing, and over 700 non-fatally injured [1], it devastated over 17,000 households, 779 businesses [2]. These two explosions resulted from the mismanagement and improper usage of the warehouse by storing and placing hazardous and flammable chemicals in the neighborhood of 11,000 tonnes, including calcium carbide, sodium cyanide, potassium nitrate, ammonium nitrate, and sodium nitrate. Recalling the history of man-made insured losses records, the Tianjin port explosion gave rise to insurance losses of around 2.5 to 3.5 billion USD (in 2015), which ranks the top in Asia and the third in the world [4]

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