Extreme weather and real estate: A case study of the Jamaican housing market

The main aim of this study therefore is to quantify the impact on real estate in Jamaica arising from extreme rainfall and hurricanes. To this end, an exhaustive geo-localized database on mortgage, land and apartment sale values is combined with localized rainfall and hurricane track data. The quantification produces some important findings. The average hurricane reduces apartment sale prices by at least 50 percent but does not affect the value of mortgages taken and that of residential land sales. Further, while extreme rainfall increases the value of apartments by 44 percent, it reduces the value of mortgages by roughly 15 percent but has no impact on residentialland sales.

Results from combining hurricane and rainfall events with 16 years of data on sale prices of land, apartments and the value of mortgages across different localities in Jamaica reveal that the housing market should take urgent adaptation measures. While hurricanes play a role in reducing apartment prices, they do not affect residential housing prices and the value of existing mortgages. The study also demonstrates that extreme rainfall reduces the value of new mortgages. The results point to the importance of climate adaptation for the real estate market and property investment.