The Market Price Premium for Buildings Seismic Retrofitting

Chiara D’Alpaos,Paolo Bragolusi

doi:10.3390/su12218791

Abstract

The Italian territory is largely prone to seismic risk and 6 million buildings require seismic retrofitting. In the last three main seismic events (Abruzzo 2009, Emilia Romagna in 2012 and in Lazio in 2016) 633 people died and considerable financial losses such as the structural collapse of buildings and interruption of production activities were incurred. During the period 1944–2017, economic losses caused by seismic events amounted to EUR 212 billion. More than 80% of the entire building stock does not respect seismic design standards provided by Italian regulations (NTC 2018). Seismic retrofitting of buildings may avoid many deaths and financial losses, as well as increase people’s safety. In addition, seismic retrofitting of buildings may also generate an increase in real estate asset value (namely a market price premium), which may accelerate investments. Despite the relevance of this issue, there is a lack of literature, which investigates the key factors in boosting investments and the market price premium for retrofitted buildings in detail. The aim of this paper is to fill this gap with respect to the Italian Real Estate market. To estimate the capitalization effect of benefits produced by seismic retrofitting on property market values, it is fundamental to know how much people are willing to pay for it. As, to our knowledge, there are no available datasets which provide house characteristics, including seismic performances and market prices of Italian real estate assets, we implemented a contingent valuation approach to determine the market price premium for retrofitted assets. In detail, information about the willingness to pay (WTP) an additional price for a seismically retrofitted home (by considering different risk exposure), ceteris paribus was elicited using open-ended questions in a self-administered web interview. In particular, we applied the methodology to a case study, i.e., a contingent scenario related to masonry-detached houses located in a seismic hazard zone. Our results revealed that individuals are willing to pay an additional price for retrofitted assets and the average market price premium ranges from 10% to 52% of the property market price.

Highlights

Over the years, the Italian territory has been exposed to earthquakes that caused victims, financial losses, the structural collapse of buildings and interruption of production activities
In Italy more than 6 million buildings are prone to high seismic hazards and require seismic retrofitting [1,9,10]: 70% of the entire building stock was built before the entry into force of Act n. 65/1974 [11], which set for the first-time antiseismic design standards
The aim of this paper is to fill this gap in literature by estimating the market price premium for seismic-retrofitted buildings and, determining how far it is optimal to push on buildings seismic retrofitting (BSR)

Summary

Introduction

The Italian territory has been exposed to earthquakes that caused victims, financial losses, the structural collapse of buildings and interruption of production activities. Economic losses due to seismic events during the period 1944–2017 amounted to EUR 212 billion [1]. Afterwards, the Italian Parliament and the government enacted a series of norms and regulations, and in 2008 it entered into force in the Ministerial Decree of 14 January 2008 [12] (recently updated by Ministerial Decree of 17 January 2018) [13], which set more stringent and exhaustive antiseismic design standards and provided specific methodologies for the design of antiseismic buildings. More than 80% of the entire building stock does not respect current seismic design standards, which guarantees high safety levels, and are currently vulnerable to seismic hazard

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