Twenty-five billion dollars worth of residential property is at risk due to increasing storm surges and coastal erosion, new research shows.
Coastal property is more at risk than ever, after significant development in popular beach towns over the past 30 years and a rise in beachside property values, CoreLogic's Coastal Risk Scores for Financial Risk Assessment report, released on Monday, found.
Increasing coastal risk is pushing up insurance premiums and could affect property values, the group said, highlighting the recent floods in NSW and Queensland as an example of the devastation that extreme weather events can wreak on 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,” CoreLogic head of consulting and risk management Pierre Wiart said.
“This is leading to direct physical and financial consequences. 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.”
He said understanding coastal risk was important to homeowners and potential buyers, who should inquire about the risk to a property and whether it might be sudden or gradual to decide whether to take out a long-term loan for that asset.
“Equally, for any financial institution, it is important to evaluate the potential downturn in property values or the concentration of a portfolio at risk,” he said.
The top 10 suburbs with the most value at risk are spread across the east coast, often in popular residential neighbourhoods or holiday towns with low elevation, high property values and a fast-receding coastline.
Paradise Point on the Gold Coast has $1.467 billion of property at risk due to its canals, the most of any suburb in Australia. About 20 per cent of the suburb is at high risk, the report said.
Cronulla in Sydney's south ranked second with $486.4 million of property at risk, followed by Port Melbourne with $483.8 million.
Other at-risk suburbs include Manly and Collaroy on Sydney's sought-after northern beaches, Melbourne bayside suburbs Brighton and Aspendale, Runaway Bay on the Gold Coast and Caloundra and Golden Beach on the Sunshine Coast.
The report also looked at coastal retreat rates, warning of gradual coastal erosion as well as the immediate risk of storm surges.
In East Mackay in Queensland, the coastline is retreating at an average rate of 7.72 metres a year, the report found.
Victoria's Queenscliff and Portland are retreating at more than 5 metres each per year, while on the NSW south coast North Batemans Bay is retreating at more than 3 metres a year.
Australia's sea levels have been rising faster than the global average, CoreLogic noted, citing the UN's Intergovernmental Panel on Climate Change's latest report.
It follows separate research this month warning one million homes are at risk of flooding across 30 priority local government areas and climate change-fuelled riverine flooding could cause $170 billion in property value losses by 2050.
The risk is already on the minds of potential homebuyers in well-heeled waterfront neighbourhoods.
PK Property managing director and senior buyer's agent Peter Kelaher said coastal risk was the first question asked by potential buyers in affected areas of Sydney's northern beaches.
“[They ask] 'is that sea wall going to protect me when we have a storm? With my insurance for flood insurance and storm insurance am I covered in that particular area? If we do have to put a sea wall in, is the council going to pay for it or do we have to pitch in and pay for it?'” he said.
Homes close to the ocean in affected parts of Collaroy and Narrabeen are trading at a discount to nearby beaches with less risk, he said.
“If you're buying the property now, people on certain parts of those beaches would discount the property 10 to 20 per cent, and other parts of the beaches that don't flood would hold their value,” he said.
He advises buyers in these areas to make sure they are paying a low price to cover themselves for resale, find out the costs of any potential new sea wall and check insurance coverage.
In Melbourne, Whitefox Advocacy managing director Nicole Jacobs said coastal risk did come up in conversations with buyers looking for bayside homes, or on the Mornington Peninsula, or for beach boxes that can sell for hundreds of thousands of dollars, although she is not regularly asked about it.
“It's part of the due diligence,” she said. “More and more people are becoming aware of it. It's something you do need to look into just to get a time frame of what it's going to look like in years to come.”
**Source: Elizabeth Redman - The Sydney Morning Herald