Rising sea levels trigger falling house prices
Rising sea levels trigger falling house prices
12 September 2022
Home prices in flood-prone areas are set to fall as climate change influences Australia’s property market values, an RMIT University academic says.
Property, Construction and Project Management Senior Lecturer Peng Yew Wong says greater difficulty in accurately predicting more volatile house prices will be “primarily due to the emergence of new drivers in the housing market due to natural and man-made disasters”.
“Flood-prone properties will be facing significant downward pressure due to rising sea level and under-perform other residential property types into the future,” Mr Wong said. “Into the future, the Australian housing market will be more volatile … due to climate change disasters.”
The research comes after the Climate Council said around one in 25 Australian homes are at high risk of becoming effectively uninsurable by 2030.
Mr Wong says the distinction is narrowing between rare “Black Swan” events that evade economic model predictions, and structural shifts in the way countries, industry and markets operate due to the increased frequency of disasters.
RMIT expects more use of unconventional monetary policies like quantitative easing to address economic impacts brought about by natural disasters in the future.
“With insurers already imposing higher insurance premiums – or not insuring at all – and the banks getting more reluctant to lend on flood-prone or cyclone-prone locations, it is reasonable to conclude that flood-prone properties will be facing significant downward pressure due to rising sea levels and as such, to under-perform other residential property types into the future,” Mr Wong said.
