Changes in Risk Appreciation, and Short Memory of House Buyers When the Market is Hot, a Case Study of Christchurch, New Zealand

TL;DR

This study examines how house buyers' risk perception and memory of earthquake risk influence their valuation of properties in Christchurch, revealing temporal shifts in price determinants across different periods.

Contribution

It provides new insights into how risk appreciation and short-term memory affect housing prices during different market phases in Christchurch.

Findings

Buyers' risk perception varies over time, especially after earthquakes.

Hedonic prices for section size change significantly pre and post COVID-19 lockdown.

Temporal shifts in house price determinants are observed across different periods.

Abstract

In this paper house prices in Christchurch are analyzed over three distinct periods of time: post-2011 earthquake, pre-COVID-19 lockdown, and post-COVID-19 lockdown using the well-established hedonic price model. Results show that buyers, in periods that are temporally distant from the 2011 Christchurch earthquake, value the risk of potential earthquake damage to a property differently from buyers soon after the earthquake. We find that there are observable shifts in hedonic prices across the different time periods, specifically for section size pre and post COVID-19 lockdown.