The Hedonic approach to examining the impacts of flood on property value in Malaysia

Flood disaster adversely affect human life as people are forced to leave their homes during flood. Properties located in the flood-prone area suffers lower demand, resulting in lower
prices. Although there have been numerous studies discussing the risk of devaluation of properties situated in flood-prone areas in the developed countries, those that focused on the
impact of flooding on residential, agricultural and industrial land properties in Malaysia are still lacking. Therefore, this study investigates the effect of flood on property values in Malaysia as well as households‟ willingness to pay for flood-control measures to mitigate flood incidence. To achieve these objectives, the study employs the Hedonic Pricing Model (HPM) in estimating the effect of flood on residential, agricultural and industrial land property values and calculating households‟ willingness to pay. The results of the study show that the
market values of residential and land properties significantly decrease due to flooding. This might be due to the high repair cost for house renovation and asset recovery on agricultural
and industrial land. In addition, the results also show that the coefficient of the interaction terms of flood variables with the structural attributes of residential, agricultural and industrial
land properties are statistically significant, suggesting that the effect of flood on the residential and land property values differs across their structural attributes. The results also suggest that
the respondents were willing to pay to reduce flood incidence. Based on these results, several policy recommendations are suggested. These include the potential to impose a charge on
households for flood mitigation purposes; introducing flood insurance programmes; applying appropriate sustainable drainage systems and lastly, improving the current flood warning systems to minimise property losses.