A study warns the property sector of the decline in value of residences in degraded natural environments
- The research, published in the magazine Nature Scientific Reviews, focuses its analysis on the area of Mar Menor (Murcia), where the depreciation in value of the housing stock since 2015 was 43%, amounting to 4.8 billion euros
- The effects of environmental and economic degradation may extend to other natural areas such as Doñana Park or Albufera Natural Park (Valencia) if they are not protected
Alicante, 20th of September 2023. The research published in the British magazine Nature Scientific Reviews has analysed the processes of natural degradation generated by human activity and the depreciation of housing prices in these areas. According to the study, in which collaborators from the Department of Foundations of Economic Analysis of the University of Alicante participated, this fact is confirmed in the housing stock of the area of Mar Menor (Murcia), which since 2015 has been in a process of severe environmental degradation. The report indicates the connection existing between the environmental health of the settings and the property value of adjoining areas, as a result of the degradation caused by human activities such as extensive agriculture and the drying of aquifers.
However, the research also expanded its thesis to scenarios where the natural environment is affected by climate change, the negative effects of which on biodiversity and the landscape may also affect the economic stability of the region or country affected. The study clearly links environmental health with the economic health of regions.
The study, entitled “Impact of the materialisation of climate risk and ecological deterioration on housing prices in Mar Menor” is the result of work by the team led by Gabriel Pérez Quirós, researcher of the Bank of Spain and collaborator in the Master’s Degree in Quantitative Economics of the Department of Foundations of Economic Analysis of the University of Alicante, along with Manuel Medina (doctoral student of the University of Alicante), Matías Lamas (Bank of Spain), and Mari Luz García (Complutense University of Madrid).
The results of the research on this saltwater lagoon in Murcia show a depreciation of housing in comparison with other nearby areas of the south of the province of Alicante, of 43% since 2015, when the first eutrophication episode occurred – an excess of phytoplankton that gets rid of the oxygen in the water and deteriorates the ecosystem as a whole. This loss of value of the housing stock of Mar Menor in comparison with the price increase of other nearby tourist areas amounts to 4.8 billion euros in the last six years.
The study aims to demonstrate the enormous economic impact generated by severe environmental deterioration, and warns of these effects in future scenarios of physical risks generated by Climate Change, both in terms of what this may entail for household incomes and the quality of banks’ mortgage portfolios, and in terms of the financial stability of a region or country.
Furthermore, the article acknowledges the need for the property sector to protect and care for natural environments near to where its residences are located, the natural environment thus also being considered an “asset” of the property, which adds to or detracts from its value. The experience of Mar Menor should be taken into account in other natural areas and their urban tourism environments such as the surroundings of Doñana Park (Huelva) or Albufera Natural Park (Valencia), which usually suffer excessive urban development and environmental pressure.
The report published in Nature Scientific Reviews elevates its conclusions to the financial sphere of a country. The article explains that environmental damage, in addition to “impact on the property value, has a direct effect on the financial stability of a country, as we mentioned in the main section. In fact, property variables are key indicators for measuring the level of financial stability of an economy, mainly due to the role of housing wealth as a collateral element”. In their study, the authors indicate that when the impact is localised, as occurs in Mar Menor, its effect is local, but when generalised, there may be adverse economic effects for global economies, which demonstrates that “our results will continue to be indicative of the consequences of broader ecological deterioration, a risk which may in fact materialise more easily in other places in light of adverse events related with climate change”.