Weighing up the risks of rising sea levels will become a key factor for house hunters as it becomes harder to insure property in the face of climate change, experts say.
Dr Karl Mallon runs a software company that builds statistical models that assess the risk that rising sea levels pose to infrastructure. It is one of several companies now modelling these risks in the real estate market. He thinks homeowners in areas under threat from rising sea levels could start finding it harder to sell as buyers become more aware of the effects of climate change.
“If you own a home in one of those areas and you try to sell it, you may find that the buyer is saying, ‘Well, I’m not going to be able to insure it’. Or, ‘It’s going to be very expensive’. Or, ‘I don’t want to buy a house that’s going to decline in value'”, Dr Mallon said.
Just getting a mortgage could prove difficult if banks decided they did not want high-risk properties on their lending books, he said. Even if only the most conservative predictions for sea level rises are correct, the Insurance Council of Australia agreed that vulnerable properties would become more expensive and harder to insure.
Dr Karl Mallon thinks property buyers need to start factoring climate-change risk into their decision-making process.
“If those scenarios are going to get worse, then you will find that insurance prices will rise to match them,” he said on the program.
A string of houses on Sydney’s northern beaches made headlines back in 2016, after being partially washed away in violent storms that battered the New South Wales coastline.
Some residents were left battling their insurers for cover for their damaged properties. They were far from the first homeowners to be surprised by how their cover changed depending on whether the water came from the sky, the sea or a nearby lake.
When thousands of Brisbane policyholders were left uncovered after the 2011 floods, the federal government put pressure on the insurance industry to develop a standard flood clause, and broaden access to flood policies to all households or face government intervention on the issue.
While more than 90 per cent of new home insurance policies now include cover for flooding, neither ‘actions of the sea’ or the effects of gradual sea level rises are covered under the standard definition.
With tens of thousands of homes located within 110 metres of soft, erodible shorelines and flooding events in Australia expected to increase 300-fold off the back of rising sea levels, this is set to become an increasing issue.
