What are the areas most at risk?
A new report has revealed the areas around Australia where coastal properties are most at risk of being affected by climate change, which could potentially affect property values as well as the cost of home loans and insurance premiums dwelling.
New Coastal risk scores for financial risk assessment CoreLogic’s white paper estimates that $25 billion of Australian coastal residential properties could be at risk from increased storm surges and coastal erosion due to climate change.
What are the areas most at risk?
According to the CoreLogic report, common characteristics of the top 10 “very high” risk suburbs include their proximity to the coast, low elevation, the fastest coastal retreat numbers, and high land values. Many of these risky properties were found to be concentrated around the Gold and Sun Coasts in Queensland, Cronulla and the Northern Beaches in New South Wales and Port Melbourne in Victoria.
Top 10 suburbs by number of buildings exposed to CoreLogic’s Very High and High Coastal Risk Score, ranked by Value at Risk (VaR)
number of housings
Property Value at Risk (VaR)
|Paradise Point (Gold Coast City)||QLD||406||43||$1,466.9 million|
|Cronulla (Sutherland)||New South Wales||8||254||$486.4 million|
|Port Melbourne (Port Phillip)||CIV||29||202||$483.8 million|
|Manly (Northern Beaches)||New South Wales||21||109||$462.1 million|
|Aspendale (Kingston)||CIV||112||136||$455.3 million|
|Runaway Bay (Gold Coast City)||QLD||136||219||$424.1 million|
|Brighton (Bay)||CIV||50||43||$415.4 million|
|Caloundra (Sunshine Coast Regional)||QLD||20||523||$380.5 million|
|Collaroy (Northern Beaches)||New South Wales||34||74||$375.9 million|
|Golden Beach (Sunshine Coast Regional)||QLD||100||294||$340.6 million|
What does this mean for me?
CoreLogic’s director of advisory and risk management, Dr Pierre Wiart, said coastal risks will crystallize over the next three decades, describing recent extreme weather events as “tangible effects of climate change”.
“This has direct physical and financial consequences. Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, home lending viability and insurance premiums.
CoreLogic Research Director Tim Lawless added that the shift to remote working has led to a significant acceleration in coastal property values over the past two years, with Queensland’s Gold Coast and Sunshine Coast seeing year-on-year increases. median value of 33.0% and 34.4% respectively in the 12 months to January 2022.
According to Dr. Wiart, it is important that owners, potential buyers and the real estate and financial sectors understand the risks associated with coastal properties, which could include:
Lower home values and riskier home loans
If you own or plan to buy property in a coastal area, it is possible that your property value will increase more slowly or even decrease over time due to the higher risk of being affected by coastal erosion, l sea level rise or higher. It may also be more difficult to successfully apply for and/or refinance a home loan if lenders are concerned about the risk for these properties.
According to Dr. Wiart, “credit risk and long-term lending are directly impacted by these natural tendencies. Similarly, for any financial institution, it is important to assess the potential decline in real estate values or the concentration of a portfolio at risk.
Less insurance coverage and higher premiums
It’s no secret that insurance costs more in some parts of Australia than others, with premiums quickly becoming unaffordable in areas most prone to natural disasters such as flooding.
According to Dr. Wiart, “the increase in coastal risk also increases the pressure on insurance. Homeowners face rising insurance premiums and limited insurance coverage, reducing the affordability of their insurance and the protection of their important assets.
What steps can I take?
Before applying for a mortgage to buy or refinance a coastal property, you might consider ordering a free property report to get an idea of its approximate value and other important information.
Comparing home loans can help you find a suitable mortgage offer for your financial situation, but you can contact the lender to find out if they have any special conditions for risky properties on the coast or elsewhere. A mortgage broker may also be able to help you find a home loan and mortgage lender that suits your needs.