Conference Agenda

Climate change threatens property markets by increased exposure to previously unrecognized risks. These risks are usually not internalized because of their rarity, potentially leading to overvaluation of at-risk properties. However, little is known about the extent to which rare and highly localized climate-induced disasters update risk perceptions in ways that influence property markets, essential to understand their broader economic and distributional effects. Using the catastrophic Gjerdrum quick clay landslide in 2020 as a natural experiment, we analyze its causal impact on sales value of quick clay exposed properties. We further explore volume effects. The landslide acted as a double information shock, first by revealing an underestimated risk, and second by highlighting its extent, as hazard maps were widely shared through the media. Leveraging detailed property transaction data from Eastern Norway, we apply a static and dynamic multi-way fixed effects difference-in-differences (DiD) design, supplemented by a bounded regression discontinuity analysis to strengthen identification. Our results reveal a statistically significant and negative impact on property values for homes exposed to quick clay, extending beyond the directly affected county. The decline in property values ranges from 2 to 5 percent. We find evidence of a positive effect on sales volume of quick clay exposed properties. From a back-of-the-envelope calculation, we estimate the total depreciation to be approximately 25 million USD.