Coastal erosion eating away at shorelines, property and trust

Coastal erosion has the potential to knock a $5 billion hole in the Australian residential property market as storm surges, rising sea levels and shoreline movements eat away at beaches and inch towards coastal properties.

The findings, published Monday (28 March) in CoreLogic’s inaugural Coastal Risk Scores for Financial Risk Assessment whitepaper, is intended to inform homeowners, future buyers and financial services sectors such as insurers and lenders, of potential future climate-related coastal risk.

It also has the potential to send shivers through coastal property markets.

Paradise Point on the Gold Coast topped the list nationally of suburbs in terms of the total value of threatened property, with almost $1.5 billion worth of real estate at risk. It also has the most detached houses at risk, with 406 houses and another 43 apartment dwellings deemed exposed.

Queensland has the highest concentration of properties at ‘Very High’ risk for the number of both individual houses and units, owing to the Sunshine and Gold Coast’s densely populated coastlines.

New South Wales, Tasmania and South Australia also have many individual houses classified as being at ‘Very High’ coastal risk.

Top 10 suburbs by number of buildings exposed to CoreLogic’s Very High & High Coastal Risk Score
Ordered by Value at Risk (VaR)

Source: Corelogic

Australian Property Investor Magazine contacted scores of real estate agencies in suburbs identified as being among the top ten most affected but was largely met with a wall of silence or off-the-record remarks that either denied there was an issue or acknowledged the problem existed but refused to comment for fear of undermining their local market.

Julie Kelley, Sales Consultant and Buyers Agent from aussieproperty.com said the lack of enthusiasm among real estate agents to comment on the issue was as revealing as it was unsurprising.

“Selling agents should reveal material facts to buyers, but that may not always include the potential future risk of erosion or flooding,” she said.

“Buyers should always investigate a property and its surrounding environment before purchasing and not just trust an agent to give them the full picture.

“For information on land erosion, flooding and other environmental factors you can engage a buyers agent, speak to your local council, engage a surveyor or use online tools.”

Ms Kelley named Brisbane City Council’s ‘Flooding in Brisbane’ webpage, the Queensland Government’s City Plan interactive mapping, and Western Australia’s Department of Water and Environmental Regulation ‘Flood planning and mapping’ site as valuable tools for property buyers concerned about flood and coastal erosion issues.

Number of properties and equivalent Value at Risk (VaR) exposed to coastal risk.

Source: Corelogic

Of the respondents willing to go on the record, two said the issue had not caused any hesitancy among buyers and that interstate and international migration continued to drive prices higher on the coast, while another said demand was still high but buyers were concerned.

“It is still a simple equation of demand outstripping supply,” Gold coast-based Giovanni Marziale, Principal Licensee-In-Charge of aussieproperty.com Queensland, said.

“We are seeing so many people pouring into the area and coastal properties are highly sought after, the properties are going up in price and there is no buyer reluctance whatsoever,” he said.

David Vertullo, Principal at Professionals - Vertullo Real Estate in Paradise Point said the 406 houses identified in the report as being at risk were predominantly in the older fishing precinct.

“This area is largely undergoing a transformation and as the older houses are replaced by new homes, the redevelopments are being completed on slabs a couple of metres higher than the original sites.”

“We’re certainly not seeing any reticence in the market.

“The newer canal developments are all built on elevated reclaimed land and I would not expect any of these to be classified as being at risk.”

Coastal risk has far-reaching implications for the country’s property market.

- Dr Pierre Wiart, CoreLogic’s Head of Consulting and Risk Management

Knight Frank’s Senior Sales Executive, Prestige Residential, Duncan Schieb, said the New South Wales suburbs in the report’s top ten had seen an increase in awareness of the issues among prospective buyers.

“I live on the beach at South Narrabeen, and it is undoubtedly a question that out-of-area buyers are bringing up but the demand for beachfront properties remains high across the beaches, with most looking at the lifestyle benefits of beachfront living.

“Those more local to the area have fewer worries about purchasing in the area as they have seen the ebb and flow of beaches over many years.

“The seawalls at Collaroy and South Narrabeen have caused much controversy among those looking at beach protection over property protection.

Insurance and elections

Most so-called “actions of the sea” are not covered by insurance, exposing the assets of millions of people and their communities living near the coast.

The Insurance Council of Australia has said the country will have to spend $30 billion over the next half century to bolster coastal defences against the threat of rising sea levels and other global heating impacts to cope with more exposed properties becoming uninhabitable

“The insurance issues are significant for many homes and buildings,” Mr Schieb said.

“Insurance products generally recognise three actions of the sea—gradual sea-level rise, storm surge and erosion—which differ in their potential to cause property damage.

“Most insurers see it as a significant risk and are not offering this insurance along Collaroy beach and apartment buildings are also seeing much higher rates of insurance.”

He said it was also a hot topic in local, state and federal politics.

“Overall, the climate conversation on the Northern Beaches is stepping up, with the upcoming election between new independent Dr Sophie Scamps and the incumbent Liberal MP for Mackellar, Jason Falinski, and coastal erosion is a small piece in the greater climate change conversation on the beaches.”

Plea for urgent action

Dr Pierre Wiart, CoreLogic’s Head of Consulting and Risk Management, and report author, said the damage caused by recent weather events in southeast Queensland and NSW were a tragic but timely reminder of the untold devastation extreme weather events could have on Australian people and property.

“In the next three decades, coastal risk will crystallise, with the tangible effects of climate change already being felt in most parts of Australia,” Dr Wiart said.

“Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, home loan viability and insurance premiums.”

The United Nations Intergovernmental Panel on Climate Change (IPCC) report, published in August 2021, called out Australia’s rising sea levels, which are increasing at a rate higher than the global average.

Dr Wiart said the impact of climate change on Australia’s coastal erosion and rising sea levels was alarming and required urgent attention.

“Understanding the coastal risk associated with those properties is important to every owner, potential buyer and ultimately our property and financial sectors that are supporting the expansion of new coastal properties in number and in value,” he said.

CoreLogic’s proprietary Coastal Risk Score places properties into one of five defined categories, from No Risk, Low Risk, Medium Risk, High Risk through to Very High Risk. Dwellings categorised as ‘Very High’ risk may be impacted by coastal retreat within the next 30 years, and may also be at very high risk of significant storm surge impact.

More than 900,000 dwellings are identified as falling into one of the four ‘at risk’ categories, with 12,694 houses and 9,441 units categorised as being at High or Very High risk of coastal exposure. The residential value of these properties is $5.3 billion and $19.6 billion respectively.

Tim Lawless, CoreLogic Research Director, said while Australia’s property wealth is principally distributed on the eastern and south-eastern seaboard, a significant proportion is located in the country’s premium coastal, river and harbour front suburbs.

“In the past two years however there has been a broad demographic shift where more Australians are prepared to consider housing options outside of the capital cities,” he said.

“Working from home has been a catalyst of this trend with more people basing themselves in regional locations during the pandemic.”

 This shift to working remotely and subsequent increase in demand for regional property has caused the value of coastal properties to accelerate significantly.

Queensland’s Gold Coast and Sunshine Coast benefited enormously from this trend, recording annual median value increases of 33.0% and 34.4% respectively in the 12 months to January 2022.

Understanding coastal risk and its potential impact on properties is critical for Australians and the property and financial services industries who support them, Dr Wiart said, particularly as the expansion of new coastal properties continues.

“While this is potentially surprising or even confronting information for homeowners, this important data will allow consumers to make the best property decisions, and help them plan for long-term wealth preservation,” Dr Wiart said.