"Natural Disasters Like Earthquakes Affect House Prices with a 3-Year Decline"

Korea Research Institute for Human Settlements Analyzes 2017 Pohang Earthquake Case

Photo from the 2017 Pohang earthquake

A study has found that in the event of natural disasters such as earthquakes, the housing market in the affected area may experience a decline for about three years.

The Korea Research Institute for Human Settlements (KRHIS) analyzed the impact of the 2017 earthquake in Pohang, Gyeongsangbuk-do on housing prices in Buk-gu and Nam-gu districts of Pohang in a report published on the 26th titled "The Impact of Earthquake Disasters on Regional Housing Markets: Focusing on the Pohang Earthquake Disaster."

The study classified the analysis targets into Buk-gu, which is geographically closer to the earthquake epicenter, and Nam-gu, which is relatively farther, noting that the regional characteristics are relatively similar.

Before the earthquake, the average actual transaction price of houses in Buk-gu was higher than in Nam-gu. After the earthquake, the decline in actual transaction prices in Buk-gu was greater than in Nam-gu.

In particular, after the government announced that "the Pohang earthquake was a triggered earthquake caused by a human-made disaster," the downward trend in apartment transaction prices in Buk-gu increased significantly compared to the decline trend in Nam-gu.

A triggered earthquake refers to a case where external forces such as drilling stimulate a fault zone close to a critical point, triggering a large-scale earthquake.

Source: Screenshot of the Korea Research Institute for Human Settlements report

Assuming the housing market recovered when the apartment transaction prices in Buk-gu rose above those in Nam-gu again, the damage lasted for about three years after the earthquake occurred in November 2017.

This period is much longer than the approximately one month observed in overseas cases. This is evaluated to be because the risk of recurrence of disasters caused by human factors is perceived as greater and more serious than unpredictable and naturally occurring earthquakes. Lee Chi-joo, a senior researcher at KRHIS, explained, "Residents may perceive the possibility of recurrence of triggered earthquakes at the geothermal power plant located in Pohang as higher than the recurrence of unexpected natural earthquake disasters."

Meanwhile, since the Pohang earthquake is characterized as a triggered earthquake and damage caused by a human-made disaster, there are calls for establishing recovery measures applicable in special cases.

The researcher pointed out, "Although the decline in apartment transaction prices in Buk-gu is greater than in other areas, efforts to improve the quality of life for residents in Buk-gu after the earthquake have been insufficient."

He added, "As recovery measures for indirect losses such as housing price declines due to natural disasters, efforts to improve residents' quality of life through the expansion of living SOC projects, urban regeneration projects, and performance improvement projects for aging infrastructure are necessary."

He further stated, "Support such as expanding bidding points, discounting guarantee fees, and providing capacity-building education and consulting for workers of local construction companies is also needed to enable local construction firms to participate in earthquake disaster recovery projects."

This content was produced with the assistance of AI translation services.