Assessing the impact of floods on residential housing prices in Singapore before Covid-19 and the impact of property price fluctuations on Singapore's GDP

Abstract

Climate change has led to increasingly extreme weather patterns, causing uncertain rainfall patterns and rising sea levels. According to Singapore’s Third National Climate Change study (V3), Singapore is expected to experience a rise in extreme wet and dry seasons, increased temperature levels and a rise in sea levels as far as 1.15metres by 2100 (Koh, 2024). Singapore faces a rising threat of floods, with the economic impact of floods extending beyond infrastructure damage, affecting long-term property values, investor confidence, and economic growth. As such, this study leverages a hedonic pricing regression model with difference-in- difference analysis to evaluate the impact of floods on Singapore’s residential property prices before Covid-19. Furthermore, it employs an economic growth model to evaluate the impact of property price fluctuations on Singapore’s GDP growth. Overall, it was found that risk of flooding causes property prices of houses in flood-prone areas to be 2.54% lower than houses in non-flood prone areas at 5% significance level. Additionally, it was found that every 1% increase in housing price will cause a 1.3% increase in GDP. Hence, these findings reinforce the significant impact of floods on the housing market and Singapore’s economy at large.