Assessment of the impact of PPR red zones on real-estate transactions on Reunion Island
PPR status regarding floods and ground movements on Reunion Island.
© BRGM, DEAL
Because of the requirements associated with PPR red zones (ban on construction or on extending existing buildings, stricter building standards), owners of the properties in question are concerned about their possible depreciation when they come to sell. In this context, DEAL, BRGM and AGORAH (an urban planning agency) conducted a study to identify the main factors explaining the extent of the devaluation suffered by properties located in PPR red zones. The aim was to provide the communities concerned, as well as real-estate market players (notaries, experts, banks, insurers), with an objective understanding of the Reunionese real-estate market's reaction to this issue.
This study addressed the problem of depreciation of properties in the red zones through several approaches: consultation of real-estate market players, appraisal of a few representative properties and analysis of actual transaction data. The results obtained were consistent:
- The current real-estate stock is largely unaffected by PPR red zones (which only concern about 3.5%);
- Properties located in areas exposed to natural risks lose part of their value, regardless of whether or not there is a PPR confirming the existence of the risk: there is an overriding notion of risk perception;
- Property depreciation is linked to the loss in value of the land affected by a red zone: large plots therefore see the greatest devaluations;
- The level of devaluation suffered by properties located in the red zones is highly variable and depends on many factors (size of the plot, geographical location of the property, type of property, etc.).
Summary of the assessment of the devaluation by real-estate professionals on Reunion Island.
Using the results
The results of this study provide:
- Qualitative evidence, which can be used to refine the valuation of properties located in PPR red zones,
- Quantitative evidence, which can be used to objectively assess the level of devaluation and the number of properties affected.
In general, this information rationalises the extent of the economic impact of PPR red zones, while not denying its importance.
- DEAL Reunion Island, SPRINR Service, Natural Risk Prevention Unit
- AGORAH - Urban planning agency
This tripartite study has provided us with qualitative evidence on the valuation of properties located in red zones, and quantitative evidence that enables us to objectively assess the level of property devaluation. While not denying its importance, it rationalises the extent of the economic impact of PPR red zones.