Earthquake Risk Embedded in Property Prices: Evidence From Five Japanese Cities

We analyze the impact of short-run (90 days) and long-run (30 years) earthquake risk on real estate transaction prices in five Japanese cities (Tokyo, Osaka, Nagoya, Fukuoka, and Sapporo), using quarterly data over the period 2006–2015. We exploit a rich panel dataset (331,343 observations) with property characteristics, ward attractiveness information, macroeconomic variables, and long-run seismic hazard data, supplemented with short-run earthquake probabilities generated from a seismic excitation model using historical earthquake occurrences. We design a hedonic property price model that allows for subjective probability weighting, employ a multivariate error components structure, and develop associated maximum likelihood estimation and variance computation procedures. Our approach enables us to identify the total compensation for earthquake risk embedded in property prices, to decompose this into pieces stemming from short-run and long-run risk, and to distinguish between objective and subjectively weighted (“distorted”) earthquake probabilities. We find that objective long-run earthquake probabilities have a statistically significant negative impact on property prices, whereas short-run earthquake probabilities become statistically significant only when we allow them to be distorted. The total compensation for earthquake risk amounts to an average –2.0% of log property prices, slightly more than the annual income of a middle-income Japanese household. Supplementary materials for this article, including a standardized description of the materials available for reproducing the work, are available as an online supplement.

我们基于2006年至2015年的季度数据，针对日本五座城市（东京、大阪、名古屋、福冈与札幌），分析了短期（90天）与长期（30年）地震风险对房地产交易价格的影响。本研究使用了涵盖房地产特征、街区吸引力信息、宏观经济变量与长期地震危险性数据的丰富面板数据集（共331,343条观测值），并补充了基于历史地震事件通过地震激发模型生成的短期地震概率数据。我们构建了支持主观概率加权的特征房地产价格模型，采用多元误差分量结构，并开发了配套的极大似然估计与方差计算流程。该方法使得我们能够识别嵌入房地产价格中的地震风险总溢价，将其拆解为短期风险与长期风险带来的部分，并区分客观概率与经主观加权（即"扭曲"）的地震概率。研究结果显示，客观长期地震概率对房地产价格具有显著负向影响，而短期地震概率仅在允许其被扭曲时才呈现统计显著性。地震风险的总溢价平均为房地产价格对数的-2.0%，略高于日本中等收入家庭的年收入水平。本文的补充材料（包含可复现研究的标准化材料说明）可作为在线附录获取。