Using Hedonic price model to estimate effects of flood on real property value in Lokoja, Nigeria

Abstract

The perceived risk associated with flood hazard has increased its awareness especially among those living within the flood prone areas. There is paucity of information on the effects of flood hazard on property values in Nigeria. The aim of the study is to assess the effects of flood on property value in Lokoja using hedonic price model with a view to contributing to the existing literature. The study uses a total of 50 residential homes that were sold in Lokoja, Nigeria between 2010 and 2012. The study used quantitative data from property transactions before and after the floor disaster and related them with the affected properties to estimate the average effects of the disaster on property value. Data from the Ministry of Lands and Urban development as well as the State Emergency Management Agency were used. Distances were measured in metres from the centroid of the building to the edge of the river and roads using Global Positioning System. The result of the estimation shows that property located within the floodplain are lowers in value by an average of N 493, 408 which represents 6.8 percent reduction in sales price for an average value house. The study adds to the understanding of the magnitude of the damage caused by flood on real property investment in Nigeria.