Property Under Pressure: Climate Change Hits Aussie Home Values
New data highlights the increasing risks climate change poses to Australian properties, potentially impacting home values and insurance premiums across the country. A recent report and interactive map, utilising figures from Climate Valuation, identifies electorates and suburbs facing heightened vulnerability to climate-related hazards such as flooding, bushfires, cyclones, and coastal inundation.
Key Findings of the Climate Risk Assessment
The report, titled At Our Front Door and associated Climate Risk Map, provides a detailed analysis of climate risk across Australia, revealing the following:
- Current Risks: Approximately 4.4% of Australian homes and businesses (652,424 properties) are already classified as being at high risk from climate-related hazards.
- Moderate Risk: A further 10.4% of properties (1.55 million) are considered at moderate risk, potentially leading to increased insurance costs.
- Future Projections: Under a high-emission scenario, the number of properties at high risk is projected to more than double by 2100, exceeding 1.3 million.
- Critical Risk Zones: Over 72,000 properties in 86 suburbs are identified as falling within “critical climate risk zones,” where 80-100% of properties face high risks, potentially leading to insurance becoming unaffordable or unavailable.
Regional Variations and Specific Threats
The impact of climate change varies significantly across different regions of Australia. Coastal areas are particularly vulnerable to rising sea levels and storm surges, while inland regions face increasing risks of bushfires and droughts. Tropical areas are more exposed to cyclone damage and flooding. Understanding these regional variations is crucial for accurate risk assessment and mitigation planning.
Insurance Implications and Market Response
The escalating risk of climate-related disasters is already impacting the insurance industry. Increased frequency and severity of extreme weather events are driving up insurance premiums, and in some high-risk areas, insurers are considering withdrawing coverage altogether. This could create significant challenges for property owners, potentially affecting property values and mortgage availability. Some insurers are starting to factor climate risks into their pricing models, differentiating premiums based on location and property characteristics. This may create a two-tiered market, with properties in high-risk areas becoming less attractive to both buyers and insurers.
Expert Commentary
Nicki Hutley, economist and former Climate Councillor, stated the climate crisis is directly impacting Australian households, with climate change threatening “their greatest asset: the home.” She cautioned that Australia “cannot insure our way out of this crisis,” stressing the need for comprehensive climate action.
According to Karl Mallon, founder of Climate Valuation, their data shows that climate change is not a distant threat but rather one that threatens communities now. He highlights 86 locations that need major government intervention, and further states that decision makers at all levels should address adapting to protect vulnerable communities and how to finance that protection.
Former NSW Fire & Rescue Chief Greg Mullins spoke of how no home or business is safe from the consequences of burning fossil fuels. He also made clear that even electorates in a low risk zone, will still be impacted by fires or floods because of climate change.
Alternative Perspectives and Mitigation Strategies
While the report highlights the significant risks posed by climate change, other perspectives emphasise the role of adaptation and mitigation strategies in reducing these risks. Investment in infrastructure improvements, such as flood levees and improved building codes, can help protect properties from climate-related hazards. Furthermore, transitioning to a low-carbon economy can help mitigate the long-term effects of climate change. There’s also debate about the extent to which individual homeowners should bear the financial burden of climate risk versus government and industry support for adaptation measures.
The Path Forward: Adapting to a Changing Climate
Addressing the challenges posed by climate change requires a multi-faceted approach involving government, industry, and individual property owners. This includes:
- Enhanced Risk Assessment: Improving the accuracy and granularity of climate risk assessments to better inform decision-making.
- Strategic Planning: Developing comprehensive adaptation plans at the local, state, and national levels.
- Infrastructure Investment: Investing in infrastructure that can withstand the impacts of climate change.
- Policy and Regulation: Implementing policies and regulations that promote climate-resilient development.
- Community Engagement: Raising awareness and engaging communities in climate adaptation efforts.
Conclusion
The data presented by the Climate Council and Climate Valuation underscores the growing threat climate change poses to Australian properties and the broader economy. Understanding these risks, implementing effective adaptation strategies, and transitioning to a low-carbon future are crucial steps in safeguarding the Australian Dream for future generations. Failure to address these challenges could lead to significant economic and social consequences.
Source: Climate Council; Climate Valuation; Industry research and analysis.
This article is based on a report from www.climatecouncil.org.au titled “Climate change threatens the Great Australian Dream”. You can find the original article here: https://www.climatecouncil.org.au/resources/climate-change-threatens-the-great-australian-dream/
Based on the key insights of this article, what is one thought-provoking question that would spark further discussion or research for property professionals? Please answer in one sentence.
NEW DATA OUT TODAY exposes the electorates where homes and businesses are most at risk from climate-fuelled flooding, bushfires, tropical cyclone winds, coastal inundation, and extreme wind.
The Climate Risk Map, an interactive online map using fresh data from Climate Valuation, allows every Australian to see the climate risks in their local area.
A new report, At Our Front Door, analyses this data at a national level. It finds:
- One in 23 Australian homes and businesses, or 652,424 properties (4.4%), across the country are already at high risk today from one or more hazards that have been made more dangerous by climate pollution.
- Another 1.55 million properties (10.4%) nationally are at moderate risk – for which insurance costs will be abnormally high. That’s a further one in 10 properties.
- At high levels of climate pollution, our exposure to climate risk is set to get much worse, with twice as many properties (more than 1.3 million) at high risk by 2100.
- Further, the analysis finds that more than 72,000 homes and businesses are located in 86 suburbs categorised as “critical climate risk zones”, where 80-100% of properties are classified as high risk and insurance may soon become unaffordable or withdrawn entirely.
Climate Councillor and economist Nicki Hutley said: “The climate crisis is literally at the doorstep of Australian households, as worsening extreme weather driven by climate pollution risks their greatest asset: the home.
“We keep getting hit by disasters in Australia and that’s driving insurance bills through the roof, but we cannot insure our way out of this crisis.
“It’s not just Australian voters in risky areas who should be looking closely at this. Five of the top 10 ASX-listed companies are banks with significant exposure to climate disaster risk through residential mortgages and loans for commercial property and businesses.
“This election there is a stark contrast between the two major parties’ climate policies. The Coalition plans will release billions of tonnes of more climate pollution which will contribute to worsening extreme weather, while the ALP has concrete policies to reduce pollution.”
“The Climate Council and Climate Valuation are releasing this data free to the public as we believe people have a right to know the threats they’re facing now and into the future.”
Climate Valuation founder Karl Mallon said: “Our data draws on 15 million commercial and residential properties in over 15,000 Australian suburbs and 150 electorates. The numbers show us that climate change is not a far-off future event: it threatens entire communities today.
“Most alarmingly, our analysis has identified 86 critical climate risk zones requiring urgent and major government interventions, such as flood levies, buy backs or other measures. It is imperative that decision makers at all levels look seriously at the stark statistics presented here and work to address questions head-on: What adaptation action are all levels of government going to take now to protect our vulnerable communities? And, how will this be financed?”
Climate Councillor and Former NSW Fire & Rescue Chief Greg Mullins said: “As the climate risk map and report makes distressingly clear, no home or business is now safe from the devastating consequences of burning fossil fuels.
“Even if your electorate is in a low risk zone, it does not mean fires or floods won’t happen in your local area because climate change has rewritten the rules.
“As the recent fires in LA and Japan show, massive fires can now happen in winter. They can happen in rainforests like the Daintree or in the suburbs of London. We’ve been through Black Summer, Black Saturday, and the 2003 fires that badly impacted Canberra. Unfortunately, we’ve already locked in conditions for similar fires again, but we have a choice for the future. We must drive down global climate pollution faster and continue the shift to clean energy. The cost of failing to do so is spelled out in this climate risk map.”
To see the risk in your community, visit the Risk Map here
ENDS
For interviews, please contact the Climate Council media team on media@climatecouncil.org.au or call 0485 863 063.
For case studies, please contact Jemimah Taylor at the Climate Media Centre on 0478 924 425 or jemimah.taylor@climatemediacentre.org.au
For data-specific queries, please contact Climate Valuation (part of the Climate Risk Group) on 0405 158 636 Petrana.Lorenz@theclimateriskgroup.com
Climate risk methodology:
The findings shared in the At Our Front Door report are extracted from a dataset produced by Climate Valuation that looks at the impact from six climate hazards (riverine flood, surface water flood, bushfire, coastal inundation, tropical cyclone wind and extreme wind) under a ‘business as usual’ scenario (RCP8.5/SSP5) on 15 million commercial and residential properties across 15,000 suburbs and 151 federal electorates.
The ranking used in the report is based on the number of properties in each electorate across Australia that are classified as ‘high-risk’ using the “Maximum-to-Date Value-at-Risk” measure. See the report for further detail about the methodology.
Climate Valuation is the first and only company to provide professional investment-grade analysis of physical climate risk to individual property owners. We aim to make climate risk easy to understand for individuals and communities so they can make informed decisions. Climate Valuation is part of The Climate Risk Group, a group of companies dedicated to quantifying the costs of climate change extreme weather. For further information: https://climatevaluation.com/about-us/
The Climate Council is a fearless advocate for the climate solutions that Australia needs. We are independent and community funded. We provide authoritative, expert and evidence-based advice on climate impacts and solutions to journalists, policymakers, and the wider Australian community.
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