A View to Die For? Housing Value, Wildfire Risk, and Environmental Amenities

Climate change and the recent rapid expansion of residential areas into rural areas after the outbreak of COVID-19 expose more communities to the wildfire risk. This research adopts a unique database containing house transaction data from near the boundary of the Bushfire Prone Area (BPA), which is designated by the Australian Government as a region with high wildfire risk, to investigate how the housing market factors into wildfire risk. We find that the properties within the BPA are valued more than those located outside the BPA. Also, the major bushfire event in the middle of 2015 enhanced the salience of wildfire risk, which caused a drop in housing value within the BPA; this negative impact of wildfire risk lasted for two years. Both the house price discount related to the wildfire and the duration of negative impact on the price are found to be smaller than the test results using the sample of the whole of Victoria State show, highlighting the importance of focusing on the boundary area to improve the accuracy of estimation. Further, the properties in the BPA with greater environmental amenities are more resilient to the impact of wildfire-risk salience than the rest of the BPA, necessitating an analysis of the role of environmental amenities in the research on wildfire risk in the housing market context