Flood Risk and Property Prices: What the Data Shows

Flood risk is one of the most significant factors affecting property values in the UK, yet it remains poorly understood by many buyers, sellers, and even some estate agents. With approximately 5.2 million properties in England alone at risk of flooding — a figure that is expected to rise with climate change — understanding the relationship between flood risk and property prices has never been more important.

This article examines the available data on how flood risk affects property values, what drives those effects, and what both buyers and sellers can do to make informed decisions.

The Scale of the Issue

The Environment Agency estimates that one in six properties in England is at risk of flooding from rivers, the sea, or surface water. In Wales, Natural Resources Wales identifies a similar proportion. In Scotland, SEPA’s flood maps show that over 284,000 properties are at risk.

These are not marginal numbers. They represent a substantial portion of the UK housing stock, and the financial implications are significant. According to research published by the London School of Economics, properties in areas that have experienced flooding can see price reductions of between 2% and 12%, depending on the severity and recency of the event.

What the Research Shows

The “Flood Discount”

Several academic studies have examined the relationship between flood risk and property prices in the UK:

Pre-flood event pricing. Research by Lamond and Proverbs (2006) found that properties located in designated flood zones — but which had not actually flooded — traded at a modest discount of around 2% to 5% compared to equivalent properties outside flood zones. This discount reflects the market’s awareness of potential risk, even where no flood has occurred.

Post-flood event pricing. The picture changes significantly after an actual flood. A study by Beltrán, Maddison, and Elliott (2018) analysed property transactions across England and Wales and found that properties affected by a major flood event experienced price reductions of 8% to 12% in the immediate aftermath. Crucially, they found that this discount persisted for several years before gradually diminishing.

The “amnesia effect.” One of the more striking findings in the literature is the tendency for flood-related price discounts to fade over time. Atreya, Ferreira, and Kriesel (2013) documented this phenomenon in their international review, and UK data supports the pattern. Approximately five to seven years after a flood event, property prices in affected areas tend to recover to levels comparable with similar properties elsewhere. This raises questions about whether the market adequately prices long-term flood risk.

Surface water risk. Most of the published research focuses on fluvial (river) and tidal flooding, but surface water flooding — which affected over 50,000 properties during the July 2007 floods — is increasingly recognised as a significant price factor. The challenge is that surface water flood risk is less well understood by buyers and less visible in standard property searches.

Regional Variations

The impact of flood risk on property prices is not uniform across the country. Several factors drive regional variation:

Property values. In higher-value markets such as London, the South East, and parts of the South West, flood risk can represent a larger absolute reduction in price even if the percentage discount is modest. A 5% discount on a property worth GBP 500,000 is GBP 25,000 — a material sum.

Flood history. Areas with a well-known flood history — Carlisle, York, Tewkesbury, Cockermouth, and parts of the Somerset Levels — tend to show more persistent and larger price effects. Buyers in these areas are more acutely aware of the risk, and local knowledge plays a strong role in pricing.

Flood defences. The presence of flood defences can mitigate the price discount. Properties protected by Environment Agency or local authority flood defence schemes are often valued more favourably than those in undefended flood zones, even where the underlying flood zone designation is the same.

Insurance availability. Before Flood Re was introduced in 2016, insurance availability was a major driver of the flood discount. Properties that could not obtain affordable flood insurance were effectively blighted. Flood Re has significantly improved the situation, though it only covers residential properties built before 2009, and its long-term future beyond its current mandate (running to 2039) remains uncertain.

How Flood Risk Information Reaches Buyers

Understanding how flood risk information is disclosed during property transactions is essential to understanding its price impact.

Conveyancing Searches

The standard residential conveyancing process in England and Wales includes an environmental search, which will flag flood risk from the Environment Agency’s datasets. The Law Society’s CON29DW drainage and water search also provides information about sewer flooding risk.

These searches typically identify:

• Whether the property is in Flood Zone 2 or 3
• Whether there is a history of sewer flooding at or near the property
• Whether the property benefits from an Environment Agency flood defence scheme
• Whether there are any planned flood defence works in the area

However, the searches do not always capture the full picture. Surface water flood risk is not always prominently flagged, and the distinction between Flood Zone 3a and 3b (functional floodplain) is not shown on the EA’s Flood Map for Planning.

The Seller’s Duty

Under the Consumer Protection from Unfair Trading Regulations 2008, sellers and their agents have a duty not to mislead buyers about material facts. Flood history is considered a material fact. A seller who fails to disclose a known flood history could face legal action.

The TA6 Property Information Form, completed by the seller as part of the conveyancing process, includes specific questions about flooding. Question 7.1 asks whether the property has ever been flooded, and question 7.3 asks whether the seller is aware of any flood risk. Providing false or misleading answers can give the buyer grounds for a misrepresentation claim.

The Estate Agent’s Role

Estate agents are subject to the same consumer protection regulations. If an agent is aware of flood risk or flood history, they must disclose it. The National Trading Standards Estate and Letting Agency Team has issued guidance confirming that flood risk is a material fact that must be disclosed.

In practice, the quality of disclosure varies. Some agents proactively provide flood risk information; others do not mention it unless asked. Buyers should not rely on the agent to volunteer this information.

The Insurance Factor

Insurance availability and cost are inextricably linked to the relationship between flood risk and property prices.

Before Flood Re

Prior to the introduction of Flood Re in April 2016, obtaining affordable home insurance for properties at significant flood risk was extremely difficult. The Association of British Insurers reported that some homeowners were quoted premiums of GBP 5,000 to GBP 10,000 per year, or were unable to obtain cover at all. This had a devastating effect on property values, effectively rendering some properties unsaleable.

The Flood Re Scheme

Flood Re is a joint government and insurance industry initiative that caps the flood element of home insurance premiums based on council tax band. For Band A properties, the cap is GBP 46 per year; for Band H, it is GBP 498. This has transformed the insurance market for at-risk properties.

However, Flood Re has important limitations:

• It only covers residential properties built before 1 January 2009. Properties built after this date are excluded on the basis that they should have been designed with appropriate flood resilience.
• It does not cover commercial properties. Businesses in flood zones continue to face significant insurance challenges.
• It is transitional. Flood Re is designed to operate until 2039, at which point the insurance industry is expected to be able to price flood risk affordably without the subsidy. Whether this transition will be smooth remains to be seen.
• It does not cover leasehold properties with more than three units. Blocks of flats are excluded.

The Impact on Prices

Research by Flood Re itself suggests that the scheme has helped to stabilise property prices in flood-risk areas. Their 2022 analysis found that the average premium paid by high-risk households had fallen from over GBP 1,200 before Flood Re to around GBP 340. This reduction in ongoing costs feeds directly into property valuations.

Mortgage Lending and Flood Risk

Mortgage lenders assess flood risk as part of their valuation process, and this can have a direct impact on property prices.

Lender Attitudes

Most major UK mortgage lenders will consider lending on properties in Flood Zone 2 and Flood Zone 3, provided that:

• The property has appropriate insurance in place
• The property has not suffered repeated flooding
• Flood defence measures are in place or planned
• The surveyor’s valuation accounts for the flood risk

However, some lenders are more cautious than others. Properties at very high risk, or those that have flooded multiple times, may find it more difficult to obtain a mortgage at competitive rates. This reduced competition among lenders can suppress prices.

Surveyor Valuations

RICS-qualified surveyors are required to consider flood risk as part of their valuation. The RICS guidance note on “Flooding: Issues of Concern to RICS Surveyors” sets out the approach surveyors should take, including:

• Checking Environment Agency flood maps and historical flood records
• Considering the availability and cost of insurance
• Assessing the condition and effectiveness of any flood defences
• Reviewing any property-level flood resilience measures

Where flood risk is identified, the surveyor may apply a downward adjustment to the valuation. The extent of this adjustment varies, but it typically reflects the additional costs and risks associated with owning a flood-risk property.

What Sellers Can Do

If you are selling a property with flood risk, there are several steps you can take to protect its value:

Invest in Property Flood Resilience

Property Flood Resilience (PFR) measures can demonstrably reduce both the risk of flooding and the cost of recovery after a flood event. Common PFR measures include:

• Flood barriers and doors for openings below the design flood level
• Non-return valves on drains and sewers to prevent backflow
• Waterproof plaster and tanking for walls below the flood level
• Raised electrical sockets and boiler above the design flood level
• Resilient flooring such as tiles or sealed concrete rather than carpet

CIWEM and the Property Flood Resilience Roundtable have published guidance on PFR measures, and the Environment Agency’s Property Flood Resilience Database is building an evidence base for their effectiveness.

Obtain a Flood Risk Assessment

A site-specific Flood Risk Assessment (FRA) can provide a much more detailed and accurate picture of flood risk than the broad-scale Environment Agency mapping alone. An FRA may show that:

• The property is at lower risk than the flood zone designation suggests (for example, because it is elevated above the modelled flood level)
• The property is protected by flood defences not captured in the broad-scale mapping
• Climate change projections for the area are less severe than the generic national figures

This information can be used to support the property’s valuation and to reassure prospective buyers and their mortgage lenders.

Be Transparent

Full disclosure of flood risk and flood history is not only a legal requirement but also good practice. Buyers who discover flood risk late in the conveyancing process are likely to reduce their offer or withdraw entirely. A seller who is upfront about the risk, and who can demonstrate the measures they have taken to manage it, is more likely to achieve a fair price.

What Buyers Should Know

Check the Flood Maps

Before making an offer on any property, check the Environment Agency’s Flood Map for Planning and the long-term flood risk assessment on GOV.UK. In Scotland, check SEPA’s flood maps. In Wales, check the Natural Resources Wales flood risk map.

These maps show:

• Flood Zone 2 — land with a 0.1% to 1% annual probability of river flooding, or 0.1% to 0.5% annual probability of sea flooding
• Flood Zone 3 — land with a 1% or greater annual probability of river flooding, or 0.5% or greater annual probability of sea flooding
• Surface water flood risk — shown as high, medium, and low risk areas

Remember that these maps show undefended risk. If there are flood defences in the area, the actual risk may be lower than the maps suggest.

Check the Flood History

The Environment Agency publishes a record of significant historic flood events, and the property seller is required to disclose any known flood history on the TA6 form. Additionally, you can make a Freedom of Information request to the Lead Local Flood Authority for information about flooding in the area.

Get a Flood Risk Assessment

If you are seriously considering purchasing a property in a flood zone, commissioning an independent Flood Risk Assessment is a worthwhile investment. The cost of an FRA is modest relative to the value of the property, and the information it provides can be invaluable in:

• Negotiating the purchase price
• Securing appropriate and affordable insurance
• Planning any future extensions or alterations
• Understanding what flood resilience measures may be needed

Factor in the Long-Term Costs

When valuing a flood-risk property, consider the long-term costs:

• Insurance premiums — even with Flood Re, premiums are higher than for non-flood-risk properties
• Maintenance — flood resilience measures require ongoing maintenance
• Potential flood damage — even with the best mitigation, there is a residual risk of flooding and the costs associated with recovery
• Resale value — consider whether flood risk is likely to increase or decrease over the property’s lifetime, and what that means for future resale

Climate Change and Future Risk

The relationship between flood risk and property prices is not static. Climate change is expected to increase flood risk across the UK:

• More intense rainfall — the Environment Agency’s climate change allowances for peak rainfall intensity range from +5% to +40% depending on the time horizon and scenario
• Rising sea levels — the UK Climate Projections (UKCP18) project sea level rises of 0.5m to over 1.0m by 2100 under different emissions scenarios
• Higher river flows — climate change allowances for peak river flow range from +10% to +95% depending on the river basin and time horizon

These projections suggest that more properties will fall within designated flood zones over time, and that flood events will become more frequent and more severe. This has significant implications for property values in areas that are currently at the margins of flood risk.

The Committee on Climate Change has called for greater transparency about future flood risk in property transactions. Their 2023 progress report recommended that property buyers should be provided with clear, standardised information about current and future flood risk at the point of sale.

The Role of Flood Defence Investment

Government investment in flood defences plays a significant role in supporting property values. The Environment Agency’s six-year capital programme (2021-2027) committed GBP 5.2 billion to flood and coastal erosion risk management, with the aim of better protecting 336,000 properties.

Research by the National Infrastructure Commission found that every GBP 1 invested in flood defences generates approximately GBP 5 in benefits, primarily through avoided property damage and reduced insurance costs. These benefits are capitalised into property values, with properties protected by new flood defence schemes typically seeing a measurable uplift.

However, flood defence investment is not evenly distributed. Urban areas and areas with high property values tend to attract more investment because the cost-benefit analysis is more favourable. Rural and lower-value areas may receive less protection, and the properties in these areas may bear a disproportionate flood risk discount.

Conclusion

The data is clear: flood risk affects property prices, but the relationship is complex and varies significantly depending on location, flood history, insurance availability, and the presence of flood defences.

For sellers, the key is transparency, investment in flood resilience, and obtaining professional advice to demonstrate the true level of risk. For buyers, the key is due diligence — checking the flood maps, understanding the flood history, obtaining an independent assessment, and factoring long-term costs into the purchase decision.

As climate change increases flood risk across the UK, and as public awareness of flooding continues to grow, the relationship between flood risk and property values will become an increasingly important issue for the housing market, for lenders, for insurers, and for government policy.

At Aegaea, we help property owners, developers, and buyers understand flood risk through professional Flood Risk Assessments. If you need clarity on the flood risk to a specific property or site, contact our team for a no-obligation discussion.