Impact of Environmental Risk on House Value
Embedded environmental risk in a geographical location is economically perceived as a result of inherent socio-cultural and political underdevelopment. This in turn reflects in the general perception of value placement by comparing such area to other developed site. In recognition of possibility of careless spread of disaster, there is a warning from Millennium Declaration on environmental disaster to guide against extinction of ecosystem by making concerted efforts at reducing the prevalence of natural hazards and man-driven actions that increase the risk. The presence of an environmental risk is a big threat to hard earn gains of development these include political stability, social and economic buoyancy, and educational progression, infrastructural and technological advancement. As such, there is a significant role played by the presence of environmental risk on existence of structural holdings house.
House and land are tangible assets that are transmissible by controlled regulations. Such regulations are coordinated by central agency with understanding of factors influencing the placement of value on transmissible properties. Among other influencing variables, susceptibility to environmental risk seems to be the most important factor that dictates market value of a house (building and property can be used interchangeably) on comparative scale. This research work shall therefore examine various negative impacts environmental risks have on house value. We shall in the course of the discussion cross examine both natural and man-made actions that serves as both direct and indirect factors in predicting house value. Emphasis shall also be made to see how soon house value market will adjust itself to normal market worth in the presence of compensation or execution of control policies to correct the posed risk. Through a research work done in this paper, we shall deduce some vital circumstances that subject an environment to risk and how much of value they cost property owner. The thesis proposes that such loss in house value resulting from impact of environmental risk is irreparable regardless of measures by any agency or authority at controlling the risk since time is a major determinant of value season.
Introduction
The impact of environmental risk on house value refers to factors of infectivity from the surroundings that rather mostly effect declining value of housing property than increasing it. The value of a house is a function and reflection of healthy environment which determines the context of sellers and buyer bargain, thus negotiating a common ground for selling of property to a price the seller is willing to give out and that in which buyer is willing to offer. This approach of determining mutual agreement between buyer and seller is used by the economic researchers in extracting impact of environmental risk on property. A model named hedonic price model can assist in value quantification. Economic researchers deal factors such as size, construct, location and environment that have influence on purchasing power to appraise economic worth of a property (Carruthers, et al, 2006).
Economic research that concerns itself with the hedonic studies engages in environmental risk assessment for several reasons. First would be to analyze how much the worth of the property decline due to the environmental damage and externality, also to determine how much would an individual experiencing the damage would be compensated. Secondly the externality can be determined by the demand curve where it gives a graphical representation of the behavior in quality good environment that gives an idea to the researcher of the impact on the benefits of reducing externality (Carruthers, et al, 2006).
The impact of perceived risk on property value has both important economic and legal implications because polluters are often tackled on the ground of nuisance law by their neighbor for causing loss of property value. Compensation for property value diminution assists in estimating the perceived risk expenses. Sometimes this is done indirectly base on the abstract nature of public risk perceptions (Mccluskey, et al, 2001).
Risk impacts due to environmental uncertainty depend on the organizational or industrial location, customer strength base, and regulatory agency in charge also it is the shareholders prospect to get involved in the monitoring and management of environmental risk, with the aim of reducing to the bearable minimum the expected loss and raising higher the eventual yield in profit (Emerging Environmental Risks A Global View, n.d).
Irrespective of diversity of investors ownership, a common issue thus arises for stake holders the concern relates to the environmental risk associated with their company and organization. Also property of business or the household value are subjected to diminishing value from environmental risk since infected water, industrial wastes, eject of chemical pollutes from the industrial exhaust into the environment, among others de-value the property when they create health risk issues (Emerging Environmental Risks A Global View, n.d).
Today, methods of measuring risk were developed for the reason of setting principles or standards for management and secure level of protection from exposure to dangerous environmental hazards. In between the developed techniques was the perception of conservatism. This involves intentional increase in estimation of risk, in order to in order to cater for certain intensity that seems to be unsure of security cover. The innovative uses of risk examination which deal with evaluation of risks from dissimilar hazardous exposure, different kind of risk and, risks due to different public settings, are incorporated in conventional risk examination strategy (Emerging Environmental Risks A Global View, n.d).
Risk appraisal is a technique of risk management whereby systematic sequence is employed to make instructive conclusions. Risk appraisal for carcinogens is of important considerations in environmental regulation risk estimation for non-cancer health professional and other environmental risk advance higher in the degree of importance. Risk appraisal plays a vital role in certain structural establishment in order to evaluate the rate of diminishing values toward ecological management as in drafting of standard of building evaluation before purchase.
Setting up cleaning goals at superfund place and setting up standards for insect killer residues on food. Broader approach use of risk examination and risk positioning will help overcome conservatism. As more people are using risk appraisal and opposing benefits are intimately observed position movements will become apparent that conservatism deforms the procedure. Better consideration on risk appraisal by the general public, journalists and legislators can lead to better examination and the setting up a progressive course for decreasing environmental risk and value appreciation. (Emerging Environmental Risks A Global View, n.d)
Contrast risk means that the technique set up to a certain degree in averting the risk posed due to environmental hazards has not been tolerated. In order to provide control to environmental health danger experts need to assist people in the society in the understanding of environmental danger pose to physical existence of structures and for industry to create genuine risk-reducing contamination plan. To evaluate the correct picture of the dangerous risks, or contaminants strong action is needed. (Emerging Environmental Risks A Global View, n.d)
It is being understood that clean water which is naturally endowed is in a way instrumental to moderating risk exposition and thus, boost house value. Factors having impact on creating an enabling environment for productivity depends upon many services such as the practice of cleaning and avoidance of bad landscape, pollution in water that has an impact of house value create health environment gives an egoistic look to the environment of the area. We are at danger of moving retrogressively in developmental ladder when we unconsciously accept options of available polluted water which has a detrimental impact. The danger is not additionally unconnected with the rare chance of unforeseen natural disaster that could happen with inaccurate prediction.
Literature Review
It has been researched that experience gained by real estate evaluators in evaluating the worth of contaminated property being affected by environmental threat is crucial in determining the extent of impact same on house value. Since house value is being commonly affected in most of the areas where these risks exist, it is not really easy to directly determine the actual worth in most appraisers carried out. Community participation is important in examining the impacts of environmental risk on property value assessment in the economic marketplace. The lesser the risk outcome of a house in marketplace assessment, the better the purchasing power for both seller and buyer. Examining with this assumption in mind guarantees a dependable result from whatever method is used in environmental evaluation. Wide accessibility of information, statistics and figures about the numbers, types and site of properties expected to be affected by environmental threat improved knowledge, data and information about the overall health risks suspect by various environmental situations. The use of time andor time coefficient is of great importance to many works done by experts relating to this study. It has permitted real estate proprietor, lenders, developers, sellers, buyers and evaluator to turn out more recognizable entities with procedure for suitable examination of the prospective impact of environmental risks on house value (Richard, 1996).
In evaluation of value worth, sigma is introduced to assist in weighing corresponding extent of risk. The word stigma is used in estate management to connote the impact of increase risk of property value diminution stemming from reduced perception of profitability of use. This is in association with reduced strength for marketability and financial return. Such examples of potential threat (risk) that devalue property include noisy environment, soil contamination due to past or existing practices on the environment, dusty atmosphere, water contamination, naturally endowed aesthetics atmosphere, land landscape and land stability (Chalmers and Roehr, 1993). The importance of community to evaluation of house value is connected with what is known as public perception under stigma. Though a subjective assessment, it is very important in that it reflect on the social orientation attached to house value, this is in accordance to a report claiming that stigma is actually value loss of property due to the presence of risk perception that brings about market resistance to property (Chan, 2001). In stigma, there is what is known as uncertainty whereby negative insignificant factors are also considered.
Related studies have been carried out by numerous researches to measure the objective and subjective impacts of undesirable environmental risk on land use and thus affecting the overall market bid for building mounted on such land (Farber et. al, 2001). Important variables considered include distance of a house from potential hazard or risk. There has been additional suggestion that availability of comprehensive report also influences the vulnerability of market value volatility. The length of distance from the source of risk creates a degree of fear that influences the choice of value placement on a particular building. Such risk is said to be a source of toxicity to existence of it surrounding building. In house value studies conducted some years ago, impacts of location of a building has an enduring effect for many years as such, it is important when estimating to recognize this and make a projection based on outcome of analysis. In a survey of tax assessors in Illinois, opinion was sought as to the impact of Environmental Protection Agencys priority list on local house values and whether or not it has any effect on appreciation rates. Outcome of a poll first suggested a lowered appreciation value for house where tax assessor is of priority. Secondly, the effect of environmental risk with the presence of an incinerator, as an example further decreased the expected increase in appreciation of susceptible building as time elapse. Further deduction had it that the rate of decline in the appreciation value of a building is directly proportional to the closer the distance of the site to the source of risk. Through a model analysis, evidence of decreasing value rate was provided by calculating financial data collected on the reason for repeated sales and income capitals accrue over years (Kiel and McClain, 1995). The yearly estimate fall is around 3.0 percent annually, this is in relation to the usual increase in land value expected with increasing environmental development.
Another closely related study found out the possibility of adjustment to equilibrium price or value over a long period of time. The study which was conducted in Dallas County on property value appreciation in the face of environmental hazardous waste also using the repeated figures from sales, McCluskey Rausser (2003) resolved that residential houses close to risk site is certainly subjected to decreasing values following release of information on the site. The moment of devaluation is found to be prolonged and thus, masked out the possibility of occupier witnessing the moment of value equilibrium. Data on equilibrium period was hard to collate since occupants lifespan probably do not outlive the existence of such building for mathematical prove. It was discussed in this report that only variation report on housing appreciation rate over a long period can supply information for examination of adjustment process. It added that in the examination of how market adjusts to the reality of risk-free existence of such a site in the absence of any over the years, the distance coefficient in the cross-sectional hedonic equation is not instructive, further submitting that the coefficient will not seize to be significantly negative as the risk is being viewed as an externality (McCluskey Rausser 2003). Ritchert in a study (1997) observed that a good evaluation of property values requires incorporation of liquidity examination to study the possibility of heralding equilibrium and to gauge local knowledge into the worth or value of such property.
Moreover, housing values were compared in two different areas with specific variability of site. One in an industrial landfill, and the other in a control area but close to source of environmental risk such as hazardous waste. The house in the industrial landfill area stays longer in marketplace than the other in control area. At a particular period of interval, there is relative equality in the extent of market stay for purchase of both houses from the two areas. Thus, one can confidently submit that value differs based on environmental risk susceptibility. This is what some experts report as market attaining new equilibrium in the face of environmental risks. One can equally argue that since the time interval before equilibrium is achieved varies, the equilibrium reached is not absolute because there should have been a supposed simultaneous increase in the value of that building with longer stay in the marketplace. This is what should be obtainable when environmental risk impacts are eliminated or when put under control.
In the same vein, property values have been assessed using the effect of two externalities influence on stigma vis--vis environmental and neighborhood externalities. Environmental externality concerns itself with the presence of toxic waste around a building, at some notable distance to it. The issue here is the danger of environmental health disturbance which do not augur well with a satisfactory occupancy by inhabitants. The second is neighboring externality. It interprets how the residents composition in the surroundings is affected by the purported impacts of the existing environmental risk in that area. All these influence house value. It was also recognized that changes in the neighboring building which does not exclude normal development, influence the value of a building. This is in addition to the existing hazardous environment. The changes include increase in quality or perception of social status, decrease or increase in crime rate, among other. Therefore, McCluskey and Rausser argued that neighboring externality provides a source of stigma that influence value of buildings and not solely the environmental risk or hazard. Dale et al (1999) though failed to construct a written frame work to distinguish value variation as been influenced by long term and short term stigma, he argued that following proper control there is no such long term sigma association with environmental risk, hence no long term effect of house value (Texas as a case study). Findings from Dale et al (1999) claimed to be evidenced from insignificant reactive response to remediation program by Environmental Protection Agency whereas from the coefficient of proximity of distance ot risk source, McCluskey Rausser (2003) measured a significant stigma response to information about environmental waste location.
Negative and Positive Impacts of Environmental Risks
The invoice for our climate-changing emissions will include more droughts, floods and other natural disasters. We need to climate proof our farms, our infrastructure and our livelihoods in order to minimize our vulnerability to future disasters
Achim Steiner, UNEP Executive Director
Range of activities engaging in environmental risks that has earned either direct or indirect impact on real estate and land use directory. We usually classify environmental risk as originally coming from such stuff as groundwater contagion or soil contagion by hazardousdangerous materials (Richard, 1996).
Few examples of environmental risk affecting values of the property include, pollution in the lakes or river badly affected that it makes water not suitable drinking near a building, effluence or fumes in the air, noise developed through a nearby motor-way or airport will cause a diminishing effect on house value on one hand, and increase on the other hand thus influencing the state of real estate worth ratio. Also substance carried through the tanks such include chemicals which are harmful to the environmental through oil fallspill out or railroad affects the neighboring environment. This in turn will have a great impact to the property valuation in real estate. (Richard, 1996)
While evaluating land contamination for value appraisal, appraiser needs to bear in mind the existence of both value adding factors and value diminishing contributors. All usage of hazardous risky or unsafe substancematerials will not cause a contagion after all. As such, not all of the contagions or contaminants will result in environmental risk that can affect or damage the whole environment though they both have degree of impacts on property. Most of them can actually be considered as risk to the environment with tendency to devalue the value of properties or nearby housing structure in the market place.
The main focus of the evaluator of property value is to determine the cost of the property with reference to the risk associated both without and within the house property. The focus of real estate is to virtually quantify effect of the presence of environmental risk on people affected living in a house meant for residential advancement. This is done by assessing the nature, state, timing and damageability of the hazardous materials, how fast they spread and what factors can control them in order to avoid or decrease the risk pose to occupants in such environment. Amount estimate is also calculated for possible control measure to be instituted in the management following purchase of the house.
Stigma is associated with property value that has an impact on public perception due to the risk created on such property by virtue of the belonging environment. In a generalize way stigma is determined or defined as an unfavorable public observation in relation to a property that is insubstantial or not directly quantifiable (Richard, 1996). In most of the real estate evaluation assignments, the price of cleanup or cover up for the losses are said to have moderate consideration for while quantifying value cost in the assessment of environmental impact on the value of the house. The additional task for value evaluator is to give opinion on the impact the attaching stigma will have on the value of a building when subjected to the marketplace for investors consideration, this include the cost of cleanup (Richard, 1996).
Impacts of Water Pollution on House Value
Environmental contamination or liabilities were initially considered with regards to the pollution in the surroundings and in the environment which was easily observed as it causes a feeling of irritation that many face severe problems of breathing difficulty and therefore it is easily detectable. As the concern for a better locality with less air pollution arose many began to consider real estate or property in a surrounding with less surface water pollution as it causes problems of unavailability of drinking water for consumption and restricted availability of recreational use of water bodies.
Another type of pollution which was ignored for years before discovery is groundwater pollution as it was not easily detectable by everyone because it is off scene. This later became a major issue and a much known environmental contamination and health risk when groundwater started to be used as the supply for drinking and other aseptic uses where characteristics of odorless, tasteless and clarity of water was needed by many industrial outfit. Since groundwater is now being used by everyone for significant purpose, the safety of the source has therefore attracted everyones attentions as a major raw material with highest level of vulnerability to environmental hazards. The existence of building close to this site throws a big blow to the well being of the people around this area thus, a diminished value of real estate assessment of such property. It therefore, portends a great environmental risk for both industrial and residential plans. Investors shy away from trouble that can incur them maintenance expenses (Missimer, 1996). For companies with water as a major resource, such building around that area can never be considered for acquisition when there is a need for business expansion since more expenses will be incurred on treating the water to achieve purity of content and quality. Examples of such industries include juice or food industries, alcohol companies, et cetera. A building that is persistently rejected owing to its citation around poorly controlled environmental of underground water pollution will continually witness a reduced value. Compared to other similar housing structures but with different location, fall in price is the quantifiable outcome of such impact of environmental risk on the value of the house.
Value Reduction due to Poor Landscape
In this section, landscape is concerned with the scenery around a house. One of these is the site of wrong citing of industry around a swampy area with inaccessible road transport system. One could also have unprofessional erection of shopping mall on expressway but provision for car park is not made. Besides the susceptibility of this shopping mall to low patronage turn out, there is increased susceptibility to crime commission by gangsters without immediate security arrest or monitoring. Such house for valuation will definitely scores low due to environmental risk of crime susceptibility. The citation of building for certain purpose in a very remote area where there is poor traffic volume and human density will have a reduced value when such building is being considered for some business or residential outlook. In this type of building, usually a state of equilibrium will arise in the later year when the actual value ought to have shot up. One may term it delayed value appreciation. A house value is first dependent more often on the landscape the internal outfit. For example, a seven star hotel constructed in a remotely bushy area with poor security measure will only undergo a gradual appreciation in value in relation to developmental staging. When other neighboring structures are in place, the building can then be considered of having a value proportional to the nature of activities taking place around the building. A residential apartment situated in the proximity of social infrastructures and other recreational facilities with definitely have a greater value estimate in market place than another building without any facility. Since most occupations take place within busy certain areas where industries, banks, government ministry, schools, among others are established, the location of residential building in this environment competes with similar expectation of productivity as of the other buildings. Due to the ease of accessibility to infrastructures, there is a far more increase in purchasing value for residential house in this vicinity compared to others outside this area.
Risks Reducing House Value When use as Collateral for Loan Acquisition
This is another negative impact of environmental risk on house value when it is intended for use as collateral. Under many environmental regulations and laws the potential for liability and the unpleasant possible effect of environmental risks and contaminations on the property value or house value has turned out to be an important factor in assessing the transactions of real estate for issuing loans on the basis of security (Missimer, 1996).
The need to obtain loan amidst obvious environmental risks or contamination can have an unfavorable and unpleasant effect on the property or house value and on the value of real estate collateral. In many cases, circumstances may abandon the right of the insured institution from the real estate collateral. Furthermore, the insured institution can also be made responsible for the environmental cleanup of the property or real estate acquired by the insured institution. Therefore, the loan made to the borrower will be exaggerated, in such an event, by many times the initial borrowed amount or the loan. It is also possible in an event or a case where real estate or the property is not considered as security for collateral. (Missimer, 1996)
Each lending institution has its own environmental risk program designed. Senior environmental risk specialist should be appointed for the implementation of the environmental risk program by the board of directors of the concern lending institution. (Missimer, 1996)
Instituted environmental risk program will be different for those lending institutions which offer loans to higher risk industries or those borrowers who have obvious environmental hazards in their surroundings than those lending institutions offering loans to lower risk industries (Missimer, 1996).
Environmental Contamination and its Impact on Market Value and Property Assessments
The introduction of governmental regulations to overhaul significant effected of environmental risk on property value was such a welcome approach. Government compensates in term of reducing tax on the house susceptible to risk in order to level up the value disparity and entice interested investor or buyer. In some other case, there is placement of government subsidy on price of purchase of property in area where there is environmental risk. This encourages buyer to save some dollars against the cost of cleaning up. In turn, buyers purchase the property in readiness for self plan to reduce existing environmental risk (Garippa et al, n.d.).
To determine the value of the properties, courts throughout the United States are practicing the approach of setting up a methodology for estimating the contaminant property. At times in the past the courts throughout the United States hesitate in the reduction of tax to the property that was influence by environmental externality because the reduction in the contaminant property is opposing to the policies in the environmental protection legislation. The focus of tax assessment is to understand and look at the cases that were highlighted recently in the courts of United States, where they are related to environmental externality and the impact of same on estimated value of the houseproperty. Court of the United States pay attention to most recently focused judgment related to the contaminant instead of assessing all the previous court decisions on this subject. (Garippa et al, n.d.)
Assessment of Property Value with Environmental Risks
The research work on the impact of environmental risk on house value is incomplete without discussing how the value is assessment. There are several challenges faced in managing environmental risks related to the value of a house or the property. One should require involvement of specialists to help find out the value of house or property exposed to environmental risks in the surroundings for expert knowledge. Thus, the time required to take decision for finalizing a deal and assessing the environmental risks in the surroundings will be delayed, it may require few months or years. This could result in negative effect of a pending transaction (Pritchard, 2000).
Experts technique used for managing risks have been proven effective. For instance, obtaining detail information about the site by an expert ensures that necessary vital data are reckoned with including house location and activities through to housekeeping, health and safety level, the basic aspects through property surveys, its valuation on yearly progression, quantity surveying of content, etc. All these information help form a constructive point to start assessing and analyzing the environmental risks near a house and or property as the case may be (Pritchard, 2000).
The information about the environmental risks near a property or house can be obtained through one of the following methods.
Through physical evidence of the nature of environmental risk. In other words, one may obtain information about the site through direct observation.
One may also ask for information about environmental risks from the other people in the surroundings or who live nearby.
Through a thorough study of environmental risks in the particular site and in its vicinity following permission documents issued by the governing or federal authority for permission to do so.
These observations, interviews and thorough studies will enable one to obtain necessary details and information about the current environmental management controls and will provide you an indication of the enduring controls of site risks, perils and hazards (Pritchard, 2000).
Furthermore, through above procedures the information or details received will form a profile of site risks for data collection for a possible elimination by appropriate agency. On the basis of this profile we can assign a risk category to the property or house which will have an effect on its value. There are five categories of risks amongst which one is assigned to any site.
1. Potentially significant in such cases it is recommended that expert involved should visit the site of the property or house and produce a report through his her observations and thorough study with respect to the chronological contaminative exploration of the property or house.
2. Higher than average this is same as the case of potentially significant in which it is recommended that the specialist of an environmental risks management should visit the site of property or house and produce a report through his her observations and thorough study with respect to the chronological contaminative exploitation of the property or house. However, the complexity of the situation here is less compared to that of potentially significant category.
3. Average those sites under this category are placed on one year review cycle. However, it is expected that the resolution of site specific recommendations should be achieved before one year.
4. Lower than average sites here are placed on two year review cycle. However, it is expected that the resolution of site specific recommendations should be achieved before the completion of second year.
5. Likely to be insignificant those sites which are categorized under this category are placed on three year review cycle. However, it is expected that the resolution of site specific recommendations should be achieved before the completion of the third year.
Other Environmental Risks
Health problems are associated with environmental risk this include risk of cancer, inhuman natural disaster and death. They have some significant impacts on house value since the environmental factors such as dangerous chemicals, oil, eventually polluted water resulting from their effects on the people living in the surroundings of prone area. Not all of the risk and dangerous materials have the same amount of health risk, thus there is degree of influence individual has on property value in the marketplace.
The procedure and techniques used to determine projected impact of environmental risk on devaluation of property was focused in the edition of a report tagged economics and appraiser. Attention was drawn towards the subject to determine the contaminated property with the price of sale of such property. The proposed idea was conveyed to a survey team to measure the environmental risk based market observation (Goliath, 2004). Cost of environmental risk is said to be the increment cost that is incurred in term of financing, investing purchasing or taking the ownership of the property with peculiarity of its environmental situation. The doubt or ambiguity assumed as a risk relates to the form of risk and to the extent at which there exist environmental contamination. In case of increasing in environmental externality, contamination and infectivity, the unfavorable observation and perception developed in the market further de-value the property in the marketplace. The environmental risk perception in the market place results in an unfavorable effect on the market due to the observed externality. Conducting a simultaneous interviews and surveys can give an objective data for proper documentation. As discussed above, the value of the property in the marketplace is determined by the perceived environmental risk and for the reduction of the value of the property in market place is more justified in the presence of more than one method of analyses used in analyzing the property worth. Formulation analyses for definite measurements include case study analyses paired sales analyses and income capitalization analyses (Goliath, 2004).
Further Discussion
Environmental risk influence the cost value of the house as it as an additional increment of the money associated with the location effected from the contaminated environment. Economic researchers name the model as hedonic price model that is used to determine the factors such as size, construct, location and environment that has an influence on decline of house property value. The impact of perceived risk on property value has an important economic and legal implication because pollute are recognize under nuisance law to cater for losses in property value. Risk impact due to environmental uncertainty depends on the organization or industry location, customer base, regulatory administration and also its shareholders prospect. Risk appraisal is a technique of using systematic sequence to make informed conclusions. Risk appraisal plays a vital role in ecological control as this sets standards for water used for its safety. To evaluate the correct picture of the dangerous risks, or contaminants strong action is needed. It is being understood that the clean water is a direct and indirect function of industrial productivity this is reckoned with among other factors in assessing available environmental risks for house value estimation. The factors that have impact on creating an effective environment depends upon many valuable services such as practicing of cleaning, avoidance of bad landscape and control of waste to prevent water pollution in an inclined areas where water flows freely. All these impact mostly a diminishing return on house value. Creation of health environment additional gives an egoistic look to the environment and thus, summing up the value worth.
The consideration made by real estate evaluator in an attempt to understanding the worth of a property constitutes both the natural and man-made environmentally influenced risk factor. Since man-made factor is a continuous activities made obvious with physical evidence, community perception and professional analysis can give a quick report of depreciation. This is unlike natural source of environmental risk whereby, on geographical expert can actually forecast into the future. In making such forecast, evidence is drawn from two or three occasions or analysis of similar occurrence with areas having commonality of earth properties in terms of longitudinal and latitudinal location from the sun, distance from the ocean, prevalence weather changes within a particular period.
Conclusions
The fact is clear here that there will always be a course for both foreseen and unforeseen environmental risk as a result of natural or man-made action. The short summary of economic implication from real estate is the simultaneous influence on house value. House values will definitely react in proportion to the degree of risk impact. The extent of reaction witness is also a function of available detail information. The immediate reaction is usually a decrease in value. Though it does to a certain degree, the value does not increase to corresponding normal price when the environmental risk is controlled. Hedonic progression equally fails to accurately predict future adjustment, expert claimed. Furthermore, the coefficient of distance which determines the degree of risk to building site and the corresponding value fall can only be relevant when there is a stable shift or following the completion of the adjustment process.
In conclusion, one could observe that house value are more for those ones farther from source of environmental risk compared to the nearer houses. This is a pointer to the fact that public perception of stigma surrounding the more affected house is higher and is of consideration by evaluator. The impact of natural disaster on house value is hard to quantify due to episodic nature of such occurrence which may not surface for thousands of years. Though one can also make a projection that the farther the generational gap between those that witness the last episode of a natural disaster around an area, the more the building in that site gain or earn restoration of diminished value.
Regardless of the amount of compensation package, a prediction in property value adjustment does not favour a complete remission of value lost even though market value of such house adjust quickly than when the risk is not compensated for. The public and individual perception of negative externalities surrounding a building also affects value estimation subjectively. This influences individual placement of worth and results in variation of quotation for similar building. In summary, a lost house value is rarely regained no matter the effort made. Any appreciable gain would have been an additional overall gain. Hence, the thesis stays firm that loss in house value resulting from impact of environmental risk is irreparable regardless of measures by any agency or authority at controlling the risk since time is a major determinant of value season.