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For Waterfront Properties, Is Location Everything?

The old real estate adage insists that location is everything, but how much truth does that hold when it comes to waterfront properties? A new study by Collateral Analytics puts waterfront real estate under the microscope to determine what factors impact whether a waterfront view is a boon or a burden.

The Collateral Analytics study, authored by Dr. Michael Sklarz and Dr. Norman Miller, does indeed show a positive impact on home values when it comes to proximity to bodies of water, but that impact varies significantly depending on the type of waterfront and various other factors. The impact shown is also lesser than that founds in some earlier studies of the same sort.

Oceanfront property tends to receive more of a value bump than property adjacent to rivers or lakes. A 2011 study by Steve Conroy and Jennifer Milosch entitled “An Estimation of the Coastal Premium for Residential Housing Prices in San Diego County” theorized that some of these price increases may be tied to temperature moderations provided by proximity to the ocean. The 2011 study found that coastal homes located within 500 feet of a coastline saw a value increase of an estimated 101.9 percent, compared to homes further than six miles from the coast. Between 500 and 1,000 feet from the coastline, that bump decreases to 62.8 percent, and “the effect declines rapidly,” according to the 2011 report.

Collateral Analytics’ new study examined “a large sample of 5-digit ZIP Codes that include both waterfront and off-water sales,” and categorized the waterfront property into three types: ocean and bay front, lakefront, and riverfront. Collateral Analytics found that oceanfront properties exhibited premiums nearly 45 percent higher than comparable homes within the same ZIP code that were not located on the ocean. For lakefront homes, the premium increase amounted to a little over 25 percent; for riverfront homes, it was 24 percent.

Waterfront premiums also vary quite a bit depending on overall location. According to Collateral Analytics’ findings, a lakefront property in Georgia gets a premium percentage increase more than three times larger than that of a riverfront property. In Louisiana, however, the disparity between riverfront and lakefront property is much less pronounced.

The study also highlights the impacts of factors such as whether a property is prone to flooding or not.

You can read the full Collateral Analytics report by clicking here.

Editor's note: This story originally misattributed the authors of the Collateral Analytics study. The authors have been corrected above.

About Author: David Wharton

David Wharton, Editor-in-Chief at the Five Star Institute, is a graduate of the University of Texas at Arlington, where he received his B.A. in English and minored in Journalism. Wharton has nearly 20 years' experience in journalism and previously worked at Thomson Reuters, a multinational mass media and information firm, as Associate Content Editor, focusing on producing media content related to tax and accounting principles and government rules and regulations for accounting professionals. Wharton has an extensive and diversified portfolio of freelance material, with published contributions in both online and print media publications. He can be reached at [email protected].

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