THE IMPACTS OF EARTHQUAKE RISK ON THE HOUSING MARKET: EVIDENCE FROM TEHRAN REAL ESTATE AGENTS

Despite significant developments in earthquake risk reduction measures (ERRMs) in buildings, these measures have not been widely implemented. One reason is that they increase construction costs. Whether households derive any utility from ERRMs, and if so how much, determines willingness to pay for them and the scale of the market-led adoption of them in relation to their costs. The analysis of market prices can under certain circumstances provide a reasonable answer to the benefit of ERRMs. Using a contingent valuation method, a survey of real estate agents was conducted to find the effects of ERRMs on the housing market in Tehran, Iran. The results show that under existing conditions there is a significant price difference between earthquake-resistant and nonresistant houses, across all districts in the city. This article predicts that increased information about earthquake risks might further increase the price difference between houses.

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