The implications of a changing climate for housing

According to a regional fact sheet included in the Intergovernmental Panel on Climate Change report released earlier this month, Australian land areas have warmed by about 1.4 degrees since 1910 and our sandy shorelines have retreated in many locations as sea levels rise at a rate above the global average.

Beyond our shrinking shoreline, the report points to a future where bushfire, drought and river flooding events occur with increasing frequency and severity.

The implications are widespread and concerning, and go well beyond direct impacts to ecosystems. As far as housing is concerned, our changing climate is likely to impact where we choose to live, and the costs associated with holding property.

Changes to building codes could increase construction costs

Following the Black Saturday bushfires in 2009, the national building code was amended to rate properties according to their bushfire attack level (BAL). This rating impacts how properties are built, as well as the materials that need to be used.

Not only do these materials increase initial construction costs, they can significantly impact the costs associated with rebuilding in at-risk areas. According to insurance firm AAMI, it can cost more than $100,000 extra to rebuild properties in higher risk bushfire areas.

With fire risk predicted to only increase, so too will the number of high BAL-rated properties.

Just as the code changed in response to Black Saturday, we are likely to see more building codes altered to help mitigate the risks associated with climate-related disasters.

Cost of holding property could increase if insurance premiums rise

One of the implications of ratings like BAL is that insurance companies use them when calculating premiums. Flooding is another example.

Currently about 90% of Australian dwellings are categorised by insurers as having a low risk of flooding, according to AAMI. However, the predicted increase in heavy rainfall and flooding events, combined with rising sea levels, are likely to drive up the proportion of at-risk properties.

If the incidence and severity of flooding and fires increase, insurance companies will adapt by increasing their premiums. Furthermore, if a property undergoes a risk reclassification, increases to insurance premiums can be substantial.

Levies to deal with climate change could become the norm

Following Queensland’s floods over 2010-11, a one-off flood recovery levy was passed by the federal government to help fund the estimated $5.6 billion reconstruction in affected parts of Australia.

According to the Climate Council, the costs associated with extreme weather disasters in Australia totalled $35 billion over just 2010-19 alone, more than double the cost seen over each of the previous two decades. With these figures set to only increase, we are likely to see similar levies implemented to combat future climate crises.

Sea levels may pose a threat to coastal properties

Many of Australia’s coastal regions are staring down the barrel of significant erosion due to rising sea levels.

In Byron Bay for example, the local council has applied coastal planning controls in identified erosion zones since the 1980s, and requires at-risk new buildings to be demountable to enable them to retreat from the coast. Not every coastal town has had the same level of foresight.

According to the Australian Academy of Science, if sea levels rise one metre by 2100, up to 250,000 properties will be at risk of flooding. Given the majority of Australia’s population live in coastal regions, the next century brings significant risk for property and infrastructure.

Buyers may be more selective about where they buy

A property’s climate risk profile is likely to become far more pertinent to prospective buyers. Even within suburbs there can be significant differences in erosion or flood risk, and buyers will become more discerning. As a result, we could see a growing divergence in what buyers are willing to pay for high versus low-risk properties.