The impact of wildfire on property prices: An analysis of the 2015 Sampson Flat Bushfire in South Australia

Abstract

This research investigates the impact of wildfire occurrence on the price of properties subject to wildfire risk. This is relevant considering anthropogenic climate change is increasing wildfire frequency, size, and severity and the expansion of wildland-urban interface is exposing more people to the costs associated with fires. The study addresses the methodological limitations of prior research by exploiting the difference-in-differences method and a comprehensive dataset comprising transaction data, location and neighbourhood amenity elements, and spatial data on wildfire risk area identification to analyse the impact of the 2015 Sampson Flat Bushfire on housing price differences between the designated Bushfire Prone Area (BPA) and non-BPA within the City of Mitcham in South Australia. The results show that houses in the BPA (i.e., facing bushfire risk) are sold at a 4.96 % discount compared to those within the non-BPA (i.e., not facing bushfire risk) after the fire, suggesting that wildfire risk perception significantly rises following the disaster. Based on a dynamic analysis, houses in BPAs experience an immediate discount of 4.55 % compared to non-BPAs in the first six months following the fire, and this effect continues for at least two years afterward. Most interestingly, a heterogeneity analysis unique to this paper shows that houses within the Medium-Risk BPA are more negatively impacted than those in the High-Risk BPA.