D’Alpaos C., Bragolusi P. (2020).
The Market Price Premium for Buildings Seismic Retrofitting. Sustainability 2020, 12(21), 8791.
Abstract:
The Italian territory is largely prone to seismic risk and 6 million buildings require seismic retrofitting. In the last three main seismic events (Abruzzo 2009, Emilia Romagna in 2012 and in Lazio in 2016) 633 people died and considerable financial losses such as the structural collapse of buildings and interruption of production activities were incurred. During the period 1944–2017, economic losses caused by seismic events amounted to EUR 212 billion. More than 80% of the entire building stock does not respect seismic design standards provided by Italian regulations (NTC 2018). Seismic retrofitting of buildings may avoid many deaths and financial losses, as well as increase people’s safety. In addition, seismic retrofitting of buildings may also generate an increase in real estate asset value (namely a market price premium), which may accelerate investments. Despite the relevance of this issue, there is a lack of literature, which investigates the key factors in boosting investments and the market price premium for retrofitted buildings in detail. The aim of this paper is to fill this gap with respect to the Italian Real Estate market. To estimate the capitalization effect of benefits produced by seismic retrofitting on property market values, it is fundamental to know how much people are willing to pay for it. As, to our knowledge, there are no available datasets which provide house characteristics, including seismic performances and market prices of Italian real estate assets, we implemented a contingent valuation approach to determine the market price premium for retrofitted assets. In detail, information about the willingness to pay (WTP) an additional price for a seismically retrofitted home (by considering different risk exposure), ceteris paribus was elicited using open-ended questions in a self-administered web interview. In particular, we applied the methodology to a case study, i.e., a contingent scenario related to masonry-detached houses located in a seismic hazard zone. Our results revealed that individuals are willing to pay an additional price for retrofitted assets and the average market price premium ranges from 10% to 52% of the property market price.
