*this article first appeared in the January 2020 Midland Express
As climate change makes extreme weather events increasingly frequent and severe, could the Australian property market take a hit?
A Climate Council study warns the value of Australian property could plunge over the next decade unless governments have the political will to deal with climate change.
The Climate Council report estimates $4 trillion could be wiped off economic growth over the next 80 years if carbon emissions do not fall.
The research estimates residential property value losses of $571 billion by 2030 related to increased extreme weather events, along with higher insurance premiums, particularly for those in bush fire prone and coastal areas. That would wipe approximately 9% of the total residential property value in Australia.
The report also indicates that these losses would not be evenly spread, as an estimated 6 % of property owners would bear the brunt of climate change risks, most likely through insurance costs.
Insurers, however, will continue to underwrite the risk at an individual property level. Where the risk is high, it will be reflected in the individual premium. Increasingly, Australians are going to struggle to pay for insurance. On current trends, by 2030 one in every 19 property owners faces the prospect of insurance premiums that will be effectively unaffordable if they are living in higher-risk areas.
Homebuyers can now find out whether climate change will hurt the value of the home they’re interested in by predicting the costs of various climate-related scenarios.
Online tools like VicPlan can generate a property report, including bushfire hazards, or the My Hazards App supports understanding weather-related and natural disaster risks that could potentially affect homes and businesses.
Real estate will always be a business of location. But as the climate change era marches on, buyers and sellers need to be aware of what risks might come with their investment.
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