Willingness to pay for flood risk mitigation among residents living near river’s confluence in Yogyakarta, Indonesia

Abstract

Both property buyers and owners are concerned about the impact of flooding on residential property price. Although several studies have investigated the possibility of property devaluation in flood-prone areas, there are still few that have looked into the effects of flooding on residential properties in Sriharjo, Imogiri, Indonesia. This study aims to examined housing characteristics such as structure, neighborhood, and environment on residential property value. We also created an interaction variable between flood and structural attributes to see whether the impact of flood inundation on property value varies depending on the age of the building, the size of the building area, and the number of bedrooms. Using the hedonic pricing model, we found that flooding reduces the market value of residential property value. The characteristics of property like land square, building square, building age, and number of rooms have influence on property price. The characteristics of neighborhoods are also influence to property price such as distance to city, distance to main road, distance to school and distance to the river. Only one environmental characteristic which influence to property price is height of flood inundation. We discovered that, on average, a rise in the amount of flood inundation decreased property prices in the research region by.015% by using a two-stage estimating approach to evaluate these associations. We calculated IDR 698,500 as the marginal implicit cost of reducing flood inundation. According to subsequent estimates, homeowners would be ready to pay an extra 0.685 percent for a decrease in flood inundation. The study’s findings will help property owners better understand the elements that contribute to property depreciation due to floods. This paper also suggests flood insurance plans since flooding is a significant issue for real estate owners.