Can climate change transform the property market?

Written by realestateview.com.au in Buying

Photo: Shuang Li / Adobe Stock

Climate change is a divisive issue. Some people are convinced that it is a hoax, while others are see it is a scientific fact and an imminent danger we all need to be gravely concerned about.

According to the Lowy Institute, about 61 percent of Australians are convinced that global warming is a serious and pressing problem, yet despite this the debate rages on, and nobody can predict with any certainty what will happen as a result of climate change.

Either way, the public debate is shaping perceptions about what the future will hold for us. Both the perceptions and the realities (whatever they may turn out to be) have the potential to influence the property markets in Australia in a significant way. We’ve taken a look at some of the reports that are currently influencing public perception and assessed how this information could potentially shape the property market in Australia in 2020 and the years beyond.

Recent reports on global climate change

The Climate Council’s latest report offers grim news. They are predicting that the Australian property market will suffer $571 billion in losses as a direct result of climate change. Of primary concern, they tell us, are the properties in low-lying areas located close to rivers and beaches.

Complicating the climate change issues, it appears likely that our sun could reach a grand solar minimum by 2050. The last such event, known as the “Maunder Minimum” created a mini ice age over a significant part of the earth in the years between 1645 and 1715.

However, the cooling effects were not universal; this event also apparently created a warming effect in a few areas of the earth. For example, according to experts at the NASA agency in the United States, Alaska and a region south of Greenland in the North Atlantic Ocean both experienced warmer temperatures during this time period.

Whether the next grand solar minimum is imminent, and whether the earth will be affected in the same way as a result of it – these things are uncertain.

So how are the property markets likely to change as a result of these possibilities? Let’s take a look at what some of the probable outcomes may be:

1.  There may be a decrease in demand for waterfront property

Experts tell us that the seas have been rising, and they’re predicting that seas will continue to rise even more as a result of global climate change. If enough investors become convinced the seas will rise, one likely outcome is that there could be a decline in demand for beachfront property.

2. Home loans may become harder to qualify for

Right now, it is relatively easy to compare home loans, pick the one that’s best for you and move forward on completing a home purchase. That could soon change.

In North America, back in 2006, the United Nations Environment Programme Finance Initiative (UNEP FI) began working to evaluate the risk to bank loans that would result from global climate change. One of their major recommendations was that banks should begin to develop risk analysis tools that would help them better evaluate, and mitigate, the risks resulting from global climate change.

Since then, those tools have become available to both banks and the public – which may soon result in difficulties with obtaining mortgages on the properties that look riskiest. On the bright side though, you probably don’t want to borrow money on a truly risky property anyway – so these tools could be of great benefit to you in avoiding dodgy future purchases.

3. Real estate investing is likely to get riskier

If global climate change truly does pose a genuine threat to the earth, it stands to reason that real estate investing could be expected to get riskier and more challenging than it ever used to be. Still, you shouldn’t let that scare you away from real estate investing if real estate is of interest to you. There are huge opportunities waiting for savvy investors as a result of climate change.

For example, pioneers in the niche of resilient building could potentially make a fortune as people seek to protect themselves from the effects of storms, strong winds and flooding.

If you’re new to real estate investing, it will be essential for you to get educated on the basics,and also about the up-and-coming trends. Start by reading real estate investing for beginners, and then progress to the future of real estate investment: climate and resilient buildings. Articles such as these will help you understand the details you need to attend to when investing for the future.

4. Home Insurance premiums may increase

The Climate Council has reported a prediction that one out of every 19 Australian property owners could face the likelihood of “effectively unaffordable” home insurance premiums as a result of global climate change. This could happen as soon as the year 2030, they warn us.

If you’re considering investing in property in the future, these are four of the most prominent issues you’ll want to be concerned about in light of the possibility of global climate change. These potential problems are not insurmountable – so definitely be open to the possible opportunities in addition to the challenges.