Flood-Induced Real Estate Price Damage Assessment Model

The development of the model was prompted by the recommendations of the Task Force on Climate-related Financial Disclosures (TCFD) by the Financial Stability Board (FSB). TCFD calls for companies to clarify the financial impacts of climate change and expand their information disclosure, which is increasingly demanded by investors. Failure to address these issues may lead to increased funding costs, declining stock prices, and damage to corporate brands, causing significant concerns, particularly among large corporations.

The model links hazard maps with GIS location data, calculating assumed damage rates for land and buildings based on projected flood depths from hazard maps. It can perform calculations if address, usage, structure, and floor-level information is available

.The damage rate for land is calculated in two scenarios: one based on the impact within the economic region affected by the flooding disaster, and the other based on the damage within the flooded areas. For the former, a quantitative economic model is used, considering past changes in land transaction prices during previous disasters. For the latter, scenario analysis is conducted, taking into account observations from the recovery process in past disasters. It's worth noting that in regions affected by events like the Great East Japan Earthquake, damage to land prices was observed. While flood-related impacts on real estate often focus on buildings, it's crucial to also consider the effects on land.

The damage rate for buildings is calculated based on component-specific damage rates (recovery costs based on the damage content for each component) and component-specific composition ratios (composition of components based on usage). This involves creating 2,200 simulation scenarios.

The model covers nationwide areas where hazard maps have been developed by local authorities. It includes asset types such as offices, residences, commercial facilities, warehouses, factories, and more, providing coverage for approximately 95% of buildings in Tokyo.

The primary target users of the service are anticipated to be real estate funds, business entities with substantial real estate holdings, and financial institutions. Funds and businesses can use it to review existing portfolios, assess new property acquisitions, while financial institutions can leverage it for collateral property risk assessment.

In recent years, there has been a frequent increase in requests for surveys and appraisals due to the rising occurrences of extreme weather events. Rather than waiting until after a disaster occurs, we encourage proactive risk assessment and the implementation of necessary measures beforehand.