The following is an excerpt from CRED’s upcoming report. To be notified when the report is launched and available for download, please contact us or join our mailing list.
Introduction
British Columbia’s property development sector is a significant driver of economic growth and an important source of employment. According to the Urban Development Institute, the sector is directly and indirectly responsible for over 220,000 jobs across the province, in areas from planning and construction to secondary supplier purchases. It makes a bigger contribution to provincial GDP than any other sector – more than natural gas, tourism, mining, forestry or film and television.
In the real estate sector, a sub-section of the property development industry, there are over 14,000 people working as realtors in Greater Vancouver, Vancouver Island and the Gulf Islands alone. The coastal real estate market is also important to private homeowners who gain value not only from a physical property but from its viewscape, proximity to waterfront and wilderness, and location in one of the world’s most liveable regions.
CRED is seeking to better understand the risks of an oil spill as part of an ongoing dialogue about the economic future of the region. Where are the best places to invest for future growth and prosperity? How can we safeguard our quality of life and support industries that will ensure long-term responsible development?
Real World Examples
To begin assessing risk, we gathered information on eight separate oil spills in the US and Canada. In three of the cases, the spills directly impacted properties and in two further cases, the proximity and perceived impact of the incidents devalued properties. In the final three cases, residents have claimed values losses but they have not yet been independently confirmed.
Case study: Pepco Pipeline, Maryland, 2000
Loss in value: 11-12% in the 1st year
In 2000, a 3,800-barrel (120,000-gallon) oil spill in a suburb of Washington DC affected property near the Patuxent River. A study published in The Appraisal Journal in 2001 concluded that waterfront and beach-access homes were significantly and negatively affected by the spill.
In the year following the incident, home values within a 10-mile study area fell 11%. In addition, waterfront properties experienced reduced sales volume. According to real estate listing data, only three waterfront homes sold in the first sale season after the spill, a 40% decrease from the previous year. Because there was no substantial variation in regional markets, the study concluded that this decline was likely due to the spill.
This is a small excerpt from an upcoming CRED report on the link between oil spills and local property values. If you would like to read the whole report, please contact us or join our mailing list.