Climate Change Knocks: Aussie Property Faces Growing Risks

Growing Climate Risks for Australian Homes

A new analysis highlights the escalating risks climate change poses to Australian residential and commercial properties. The report identifies suburbs and federal electorates facing the most significant threats from climate-fuelled extreme weather events, examining the types of hazards driving these risks and the potential impact on property values and insurance affordability.

Key Findings of the Climate Risk Analysis

The analysis suggests a significant portion of Australian properties are already at moderate to high risk from worsening extreme weather events linked to climate change.

• High Risk: The report estimates that 652,424 properties (4.4%, or one in 23) across Australia face a high risk from climate-related hazards in 2025. This level of risk may lead to unaffordable or unavailable insurance coverage.
• Moderate Risk: An additional 1.55 million properties (10.4%) are classified as being at moderate risk, suggesting that insurance premiums will likely be significantly elevated.

The increased frequency and severity of extreme weather events, partly attributed to greenhouse gas emissions, are contributing to higher costs for homeowners through increased repair expenses and escalating insurance premiums. The report raises concerns about the potential devaluation of properties should insurance become unattainable on a regional scale, potentially destabilising the property market given the significant role of mortgages in the banking sector.

Uneven Impact: Critical Climate Risk Zones

The report emphasizes that while climate impacts affect all Australians, certain communities face disproportionately high risks. Over 72,000 Australian homes and businesses, spread across 86 suburbs, are located within “critical climate risk zones,” where 80-100% of properties are considered high risk, and widespread damage is anticipated.

These zones present challenges beyond individual homeowners, necessitating coordinated intervention from all levels of government in collaboration with affected communities. Outside these zones, almost 590,000 properties are also identified as high risk, potentially leading to uninsurability. These properties face projected annual damage costs equivalent to 1% or more of their replacement value.

The federal electorates identified as being most at-risk include Dobell, Richmond, Hunter, Page, and Robertson in New South Wales; Nicholls in Victoria; Mayo in South Australia; Maranoa and Brisbane in Queensland; and Durack in Western Australia. Coastal communities along the New South Wales coast, from the Northern Rivers region to the Central Coast, are identified as a climate risk hotspot.

Rising Risks and Associated Costs

The report indicates that inaction on climate change has led to an increase in the number of Australian properties exposed to high climate risks, resulting in rising insurance costs. Since 1990, approximately 80,000 properties have been added to the High Risk category, primarily because of escalating climate risks.

Projections suggest that the number of High Risk properties will reach 746,185 by 2050 (5% of properties analysed) and exceed 1.3 million by 2100 (8.8%). Rising insurance premiums are exacerbating cost-of-living pressures, potentially leading homeowners to reduce their insurance coverage or forgo it altogether. The report expresses concern that many households most vulnerable to climate change lack the financial resources to enhance the resilience of their homes, relocate to safer areas, or recover after damage.

The devaluation of high-risk properties poses a significant concern. As insurance becomes increasingly unaffordable, these properties (which currently represent 4.4% of analysed addresses) may become more costly to own and harder to sell, requiring urgent attention to protect them from physical damage and financial losses.

Addressing the Climate Crisis

The analysis stresses that insurance alone cannot solve the climate crisis. Rapid and substantial reductions in greenhouse gas emissions are required, along with immediate national measures to protect those facing critical risks.

The report highlights the need for governments to transition away from fossil fuels and proactively manage options for communities in critical risk zones, including strategies like managed retreat or property buybacks. Prioritising climate-proofing, or relocating properties outside high-risk areas, should also be considered where economically viable.

The Need for Transparency and Information

The report calls for open access to the latest risk information, guidance on strategies to protect homes, and enhanced financial assistance for homeowners facing high risks. Insurance companies are urged to disclose their knowledge of climate change risks to customers and transparently account for measures taken to protect properties and communities in their premium pricing.

Other viewpoints suggest a need for better infrastructure planning and development that considers the long-term impacts of climate change. It is argued that focusing on mitigation, such as building more resilient homes and investing in flood defences, will be crucial in ensuring the stability of the Australian property market. Some experts also highlight the role of individual responsibility, encouraging homeowners to take proactive steps to safeguard their properties against environmental damage.

Source: Industry research and analysis.

This article is based on a report from www.climatecouncil.org.au titled “At our front door: Escalating climate risks for Aussies homes”. You can find the original article here: https://www.climatecouncil.org.au/resources/escalating-climate-risks-for-aussies-homes/