The real estate market appreciates climate change preparedness

Residential real estate retains its value best in areas not threatened by climate change.

In his dissertation for the University of Helsinki, Athanasios Votsis, a researcher at the Finnish Meteorological Institute, studied the fluctuation in property prices in Helsinki, Pori and Rovaniemi in response to flood risk maps. He also examined how the proximity of green spaces was reflected in the per-square-metre prices of housing.

Floods caused, among others, by torrential rains are expected to increase due to climate change, but, on the other hand, green spaces have been found to regulate and reduce flooding.

– My research indicates that preserving green spaces and providing information about flood risks steers urban development in a sustainable direction, says Athanasios Votsis.

According to the study, when the Finnish Environment Institute published detailed flood risk maps during 2006­–2008, the price of properties adjusted downwards in flood-prone coastal areas and, at the same time, increased in nearby safe yet otherwise similar coastal areas.

Green spaces boost the value of nearby real estate

Real estate developers can often gain financial benefits from green areas, because green areas capitalize positively in the per-square-metre prices of properties. In other words, adding or preserving green spaces is a good investment. According to the environmental-economic calculations made by Votsis, green spaces also offer financial advantages to the owners of neighbouring properties.

– In a relatively dense urban environment, interspersed green spaces appear to raise the value of residential real estate over the long term, explains Athanasios Votsis.

A green space can be a park, garden, meadow, field or green roof, but, as Votsis points out, the specific mix of green spaces should match the right location.

Limited liability of insurance companies

– It is the city that ultimately carries responsibility for damage, since the liability of insurance companies is limited in the event of ever-increasing natural catastrophes. It is therefore in everyone’s interest that we focus on sustainable urban development in safe areas,  says Votsis.

In the researcher’s opinion, Helsinki has done a good job when planning urban development, but in the future, the city should take the climate change impacts into consideration in new residential areas and avoid construction in areas susceptible to floods. Votsis’s research results indicate that gentle steering, that is, a coordination of planning interventions with real estate market reactions, is the best way to promote sustainable development and obtain optimum results for residents.

The dissertation of Athanasios Votsis Athanasios Votsis: Space and price in adapting cities – exploring the spatial economic role of climate-sensitive ecological risks and amenities in Finnish housing markets.

Further information:

Adriaan Perrels, Research Professor, Finnish Institute of Meteorology, tel. +358 (0)50 583 8575, adriaan.perrels@fmi.fi

Heikki A. Loikkanen, Professor Emeritus of Urban Economics, University of Helsinki, tel. +358 (0)40 5010156, heikki.loikkanen@helsinki.fi

Athanasios Votsis, researcher, Finnish Institute of Meteorology, tel. +358 (0)50 433 0789, athanasios.votsis@fmi.fi

Science communicator Riitta-Leena Inki, University of Helsinki, tel. +358 (0)50 448 5770, riitta-leena.inki@helsinki.fi