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Jurnal Ekonomi Malaysia

57 (2) 2023 149 – 161

Impact of Natural Disasters on House Prices: Evidence from Indonesia

Faculty of Economics and Business
Universitas Sebelas Maret,
Jalan Ir. Sutami 36 Kentingan,
57126 Surakarta, Jawa Tengah. INDONESIA.

ariyanto_an@staff.uns.ac.id

Faculty of Economics and Business
Universitas Sebelas Maret,
Jalan Ir. Sutami 36 Kentingan,
57126 Surakarta, Jawa Tengah. INDONESIA.

yst_stm13@staff.uns.ac.id

Faculty of Economics and Business
Universitas Sebelas Maret,
Jalan Ir. Sutami 36 Kentingan,
57126 Surakarta, Jawa Tengah. INDONESIA.

lukmanhakim@staff.uns.ac.id

Faculty of Economics and Business
Universitas Sebelas Maret,
Jalan Ir. Sutami 36 Kentingan,
57126 Surakarta, Jawa Tengah. INDONESIA.

suryanto_feb@staff.uns.ac.id

Abstract

This study examined how natural disasters affect house prices in Indonesia. The study used quarterly data from 16 provinces spanning 2012 to 2019, with the data set of natural disasters constructed as dummy variable. The regions were then clustered based on their disaster vulnerability. Panel data regression was conducted to test whether house prices in areas with different frequencies of natural disaster events adjust to market prices in the housing market. In moderate-risk regions with frequent earthquakes and volcanic eruptions, the higher regional income and greater minimum salaries were associated with increased housing prices. Conversely, higher population density led to a decline in house prices. However, areas prone to frequent floods, better economic conditions and increased minimum salaries were linked to declining house prices. The situation in high-risk regions was the reverse of that in moderate-risk areas. In regions with high disaster vulnerability, the rise in house prices is likely to decelerate. Regardless of this association, an increase in housing price was inevitable due to inherent regional factors even if the houses were located in a high disaster-risk area. This study extends the housing demand theory by explaining the influences of endogenous and exogenous factors on housing prices. The latter factors can influence through different responses depending on socio-economic conditions affected by the three major disasters, based on vulnerability of the clustersNatural disasters and regional economic diversification offer potential benefits related to the policy of stakeholders’ housing prices.

 

 

Keywords

Clustering; disaster vulnerability; house price; Natural disaster; regional factor

JEL Codes

Q54, R11, R31
http://dx.doi.org/10.17576/JEM-2023-5702-11
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Bibliography

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Nugroho, A. A., Purwaningsih, Y., Hakim, H., & Suryanto, S. (2023). Impact of Natural Disasters on House Prices: Evidence from Indonesia. Jurnal Ekonomi Malaysia, 57(2), 149–161. http://dx.doi.org/10.17576/JEM-2023-5702-11

@article{nugroho2023impact,
  title={Impact of Natural Disasters on House Prices: Evidence from Indonesia},
  author={Nugroho, Ariyanto Adhi and Purwaningsih, Yunastiti and Hakim, Lukman and Suryanto, Suryanto},
  journal={Jurnal Ekonomi Malaysia},
  volume={57},
  number={2},
  pages={149—161},
 

year={2023},
}

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