LOOKING UNDER THE HOOD 13.4 – Perceived Risk and Uncertainty;

Why Did the 2015 Chemical Explosion in Tianjin, China Affect Market Prices for Land Nationally?

By Orell Anderson and David Kader

Real estate research provides evidence that properties potentially exposed to perceived or actual risks may experience price impacts. Looking Under the Hood reviews publications that illustrate the theoretical, methodological, and data challenges faced by scholars and practitioners studying detrimental conditions and their impacts on property values.

Xiaofong, Huang, and Zanghe[1] analyzed the effects of the 2015 Tianjin Explosion on land values near chemical industrial parks in China. Using a statistical method called Hedonic Regression and a focus on Difference-in-Differences[2], they found a significant decline in land prices within a 3.5-kilometer radius of chemical industrial parks. Land prices dropped by 26.1% within the first 180 days after the explosion and continued to decrease by 19.1% after 360 days, compared to areas farther away. The study shows that buyers with less real estate development experience were more impacted, especially in smaller eastern cities, and in regions with a history of similar accidents. Increased media attention also played a role in amplifying the negative effects.

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Chemical accidents, like the one in Tianjin, often involve the unintentional release of hazardous materials and are accompanied by fires or explosions. Previous research has focused mainly on the impact of such environmental disasters on housing prices. However, this study broadens that understanding to show that land markets are also affected, especially since real estate developers react strongly to perceived risks. The research highlights how these price effects are not limited to the local area but spread to cities across the country, as information about the explosion circulated through media and social platforms.

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The findings suggest that the explosion significantly altered how buyers, especially housing developers, assessed the risks of purchasing land near chemical industrial parks. As public awareness of these risks increased, particularly in areas with higher media coverage, the price drops became more pronounced. The effect on land prices was short-term, disappearing within two to four years after the event. This study emphasizes how industrial accidents can reshape public risk perceptions and, in turn, influence economic behavior in real estate markets across a nation.

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[1] Dong, Xiaofong, Dong, Huang, Zanghe “The Impact of Chemical Explosion on Land Market: Evidence from Tianjin Explosion in China” https://papers.ssrn.com. bottom of Form

[2] Differences-in-Differences (DID) regression is a statistical technique used to assess the causal impact of an event by comparing outcomes in a test or treatment group—where the event occurred—with outcomes in a control group—where the event did not occur. This method helps isolate the effect of the event by controlling for other factors that might influence the results.

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