Policymakers, researchers, and property experts caution that home buyers in Australia and New Zealand are overlooking the risks of climate change as they gravitate towards coastal or bushland lifestyles or aim to enter the property market.
According to climate risk specialist XDI, natural disasters could potentially reduce Australia’s housing market by around A$800 billion by 2030, which equates to approximately 6.7% of its total value, as reported by Reuters.
“Can the economy ride that out? Maybe. Will certain communities suffer more than others? Yes. So you might have very significant community impacts,” said Karl Mallon, director of science and technology at XDI.
Also read: Climate poses ‘high risk’ to Asia-Pacific real estate assets, XDI report warns
According to research from the Australian property website Domain, every increase in bushfire risk rating decreases a home’s value by 2%. Additionally, for each percentage point increase in the likelihood of a 50-centimetre flood, there is an associated 0.8% decline in the property’s value.
Climate change poses an increasing risk to global real estate, yet Australia’s and New Zealand’s housing booms have driven record prices and personal wealth accumulation, particularly in sprawling homes near waterways and coastlines.
This trend exacerbates the threat to the economy, banks, and residents in these regions.
Industry experts note that insurance premiums for climate-related risks have escalated to the extent that some homeowners are finding it increasingly unaffordable to protect their properties.
In a current government inquiry, leading insurer Allianz Australia disclosed that approximately 74% of customers with the highest flood risk rating opted out of flood cover last year, up from 63% previously.
As many as 90% of residents lacked flood insurance in severely exposed communities like the river regions near Lismore.
According to data from property consultant CoreLogic, home prices in Australia’s most flood-prone or coastal markets have rebounded to previous highs. In places like Lismore, mortgage brokers report that affluent investors are purchasing properties at significant discounts.
