Pricing urban flood risk: Evidence from the housing market in Beijing

Urban flooding poses a salient threat under climate change, with housing markets providing a critical lens through which to understand its economic consequences and how market participants perceive and adapt to climate risks. Yet whether and how urban flood risk is capitalized into housing markets remains poorly understood in developing countries, where granular risk information is often limited. Taking the catastrophic July 21, 2012 Beijing Flood as a quasi-natural experiment, this study estimates the causal effect of urban flooding on housing prices in Beijing, China. We integrate officially disclosed inundation locations with property-level transactions in a hedonic difference-in-differences framework and incorporate high-resolution hydrodynamic simulations to characterize flood exposure and physical damage. The results show that housing-market responses are concentrated around severely inundated locations: housing prices within 500 m of these sites decline by 2.4% following the event, equivalent to an average depreciation of 43,470 CNY per dwelling. The effect attenuates with distance, dissipates after nine months, and is amplified by flood-related discussions on social media. Hydrodynamic simulations further reveal that physical damage is associated with larger price discounts particularly in locations where flood risk is salient and publicly observable. Moreover, flood-induced price declines are more pronounced in lower-priced communities and economically weaker areas. By providing micro-level evidence from China, this study highlights the importance of risk information in flood-risk pricing and offers insights for more inclusive and resilient urban risk management.