For many Kiwis, property remains the biggest investment they’ll ever make. Increasingly, that investment is being threatened by the frequency and severity of extreme weather events and climate-related disasters. As the impact of climate change is evident, awareness of climate-related hazards is set to play a much bigger role when it comes to deciding where to buy property and the type of property to invest in.
More extreme weather events
Climate change refers to long-term shifts in temperatures and weather patterns. Since the 1800s, human activities have been the main driver of climate change, primarily due to burning fossil fuels like coal, oil and gas, that generate greenhouse gases acting like a blanket wrapped around the Earth, trapping the sun’s heat and raising temperatures.
Warmer temperatures over time disrupt the usual balance of nature, posing many risks to human beings and all other forms of life on Earth. The consequences of climate change include intense droughts, water scarcity, severe fires, rising sea levels, flooding, melting polar ice, catastrophic storms and declining biodiversity, amongst others.
We’ve already seen the devastating impact of recent flooding. In contrast, other parts of the world are battling heat waves and sweeping wildfires. While these types of weather events were unusual in the past, they’re all too commonplace now, and experts believe these extreme weather events point to climate change.
Coastal properties most affected
In recent months, New Zealand has experienced some of the worst flooding ever, displacing hundreds of Kiwis and rendering their homes unlivable. The flooding has been further exacerbated by rising sea levels.
Research undertaken by the New Zealand Searise programme calculates a sea level rise of just 30 centimetres would turn a one-in-100 year flood in Wellington into an annual event. With two thirds of New Zealanders living within 5km of the coast, rising sea levels is an issue that increasingly impacts a large proportion of the population.
While coastal properties remain desirable and usually attract higher sales prices, growing awareness of climate change, along with higher insurance premiums in hazard-prone areas, could result in declining demand in areas that are most affected by the impacts of climate change.
Insurance premiums increasing
Rising sea levels lead to coastal erosion and flooding, causing significant damage to homes and infrastructure. It’s estimated that between 2007 and 2017, climate change-related flooding and droughts cost the New Zealand economy $840 million.
Insurance companies may already be considering how insurance policies are calculated to account for possible climate risks. In some hazard-prone regions, homeowners may already be bearing the cost of higher premiums. High insurance premiums or unavailable insurance is likely to have a compelling impact on home buying decisions in these areas.
Keeping climate change top of mind
It’s no longer possible to ignore the effects of climate change. It’s an issue that should be at the forefront of all home buying decisions. Even in a competitive market environment with dwindling supply, it’s vital home buyers consider the impact climate change could have on the property they’re buying.
Whatever stage of the home buying process you’re at, it’s worth seeking expert financial advice to help you plan a secure financial future. For more financial advice tailored to your unique situation, get in touch with a Mortgage Express branded mortgage adviser today.
