Bleak climate report points to property market wipeout, uninsurable homes

A harrowing report into the impact of climate change portrays a not-too-distant future where a million homes will be uninsurable and national property values would’ve lost $611 billion in value.

The National Climate Risk Assessment was warned that by 2050 at the current rate of climatic attrition would see temperatures rise in Australia by 2 to 3 degrees Celsius, resulting in lost wealth, reduced labour productivity, and projects that cannot be built due to the inability to insure them.

The report is produced by the federal government’s Australian Climate Service (ACS), which itself is a partnership between s a partnership between the Bureau of Meteorology, CSIRO, Australian Bureau of Statistics and Geoscience Australia.

The apocalyptic tone of the first such national assessment was captured by the ACS’s description of the unfolding climate disaster as ‘Cascading, compounding and concurrent’.

The report’s release comes just days before the government is due to outline its 2035 Target and Net Zero Plan.

When we look at how property buyers are currently behaving, climate risk does not appear to be a major factor in decision-making.

- Nerida Conisbee, Ray White Group

Special Envoy for Climate Change Adaptation and Resilience, Kate Thwaites, said, “Australians know that the effects of climate change are already impacting their homes, businesses and way of life.

“While we can no longer avoid climate change altogether, every action we take towards our goal of Net Zero emissions by 2050 will help to protect Australians.”

The wide-ranging report detailed the impact of climate change on all aspects of Australian life, from the natural environment and water security, to the economy, health, national infrastructure and residential property.

For the latter, the biggest threats were fire and coastal flooding and erosion.

“Damage-related loss in value is expected to rise to $571 billion by 2030, $611 billion by 2050 and $770 billion by 2100 at (global warming level) +3.0C,” the report noted.

Shadow Education Minister Jonathon Duniam questioned the timing of the report, suggesting it was deliberately released to lay the groundwork for the government’s release of its emissions targets.

He called for more clarity around the cost of the government’s plan to tackle climate change.

“What they won’t tell us is the cost of following through with their plan.

“They told us the cost of not acting on climate change but cannot tell any man or woman on the street how much it’s going to cost them,” Mr Duniam said.

The government is widely expected to announce a target of 60 per cent or more emissions reductions on 2005 levels by 2035. 

Combating climate change’s threats to homes

The Housing Industry Association (HIA) on Tuesday (16 September) said that the most effective way to counter the impact on residential housing stock was to upgrade existing properties.

HIA Chief Executive Industry and Policy, Simon Croft, told the Senate Inquiry into the Climate Risk Assessment that the federal government should drive a national, coordinated plan to make Australia’s homes stronger and safer in the face of natural disasters.

“The greatest opportunity in mitigating climate change lies in upgrading Australia’s existing housing stock.

“While new homes already meet high and improving standards, the country’s 8-10 million older dwellings remain the most exposed to extreme weather and require targeted action to lift their resilience.

“The real challenge is the millions of older homes that need focused upgrades to withstand future events.

“HIA calls on the federal government to work with states, territories and industry on a clear timetable and resources for these reforms.

“Taking a steady, coordinated approach now will strengthen our homes and communities and reduce the cost and disruption of future natural disasters,” Mr Croft said.

The Planning Institute of Australia (PIA) was equally strident in its assertions that climate change posed a huge risk that required mitigation sooner than later.

Matt Collins, CEO, PIA, on Tuesday said every $1 invested in adaptation delivers a tenfold return.

“No Australian community is immune, but some will be hit harder than others.

“Natural hazards must not be viewed as contingencies but as inevitable and increasing risks to communities.

“The evidence underscores the urgent need to embed climate adaptation and emissions reduction into land use, housing, and infrastructure planning.

“These are among the most potent levers for reducing future exposure and managing legacy risks.”

Climate’s costly calamity

The assessment found about 751,000 (8.2 per cent) of residential buildings are currently located in “high risk” areas for floods, bushfires, tropical cyclones and heatwaves, while 794,000 (8.7 per cent) are in “very high risk” areas. That’s equates to more than 1.5 million homes today.

Even under a conservative 2°C warming scenario, that’s expected to rise to 789,000 homes (8.9 per cent) in high-risk areas, and more than 1 million (11.1 per cent) in very high-risk areas.

The assessment found 1.5 million people in coastal communities – especially in low-lying areas within 10 kilometres of soft shorelines – could be in high and very high risk areas for coastal flooding and erosion by 2050. 

The total cost to the economy of disasters is expected to double to at least $73 billion by 2060, or 4 per cent of Australia's GDP, according to Deloitte modelling cited in the report.

The current climate risk to the 'infrastructure and the built environment system' is rated Low–Moderate. By 2050, the climate risk to the Infrastructure and the built environment system is expected to increase to High–Very High.

Is the property market listening?

Climate change might be causing alarm on a global scale but Australian property buyers still seem more focused on the view from their balcony than the long term view around climate change.

Property prices in many of the most at-risk suburbs are still delivering annual capital growth in the double digits.

Ray White Group’s Chief Economist, Nerida Conisbee, said the national assessment makes clear the scale of the challenge but the message might still be yet to sink in.

“When we look at how property buyers are currently behaving, climate risk does not appear to be a major factor in decision-making.”

Her analysis of 85 suburbs identified in a Climate Council study as being at the highest risk of being affected by climate change revealed that property prices were still climbing.

“Lifestyle continues to trump risk,” Ms Conisbee said.

“For many buyers, the appeal of scenic locations and premium amenities outweighs the long-term dangers of climate exposure.

“Insurance is already becoming a major issue,” Ms Conisbee warned.

“Rising premiums and out-of-pocket repair costs could eventually outweigh the lifestyle appeal that has so far driven demand.”

Climate Change Minister Chris Bowen said he did not think the risk to property values was “a great surprise”.

“Already in parts of Australia, the insurance market is challenged,” he said at a Parliament House press conference.

“Many Australians will find this report confronting (but) I don’t think many will be particularly surprised that climate change is having and will have an impact on Australia.

“I would say to people, ‘Let’s be clear eyed about the challenges, let’s be realistic about the threats, but also let’s be optimistic about the future, because if we take action, we can avoid the worst of the impacts’.”