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Australia’s property market should brace itself for the impact of climate change and the potential extreme weather, CoreLogic has warned.
Labelled a “code red for humanity”, a recent report published by the Intergovernmental Panel of Climate Change (IPCC) has warned of impending dangers for island countries such as Australia and New Zealand as climate change threatens to wreak havoc across the globe.
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The United Nation’s body for assessing the science related to climate change released the first of several reports outlining its most up-to-date understanding of the climate system.
The first of several reports from the IPCC’s three working groups revealed that scientists are observing changes in the Earth’s climate in every region and across the whole climate system.
According to the report – written by 234 authors from 66 countries – floods, droughts, bushfires and coastal erosion could become much more common and, as such, presents a real risk to Australia’s property market, which now has an estimated value of $8.8 trillion.
Commenting on the report’s findings, Dr Pierre Wiart, CoreLogic Asia Pacific’s head of consulting and risk management solutions, said that given the large geographical spread of the residential buildings and the variety of building types, any climate-related impact could take numerous forms.
“We are at a turning point where everybody is more aware of the potential impact of climate change,” he said.
According to Dr Wiart, while Australians are still paying substantial premiums to live close to the coast or along rivers, the banking, finance and property valuation industry is struggling to come to terms with the impact of climate-related risks.
“As we start to assess risk and there’s heightened consumer awareness, we can expect more scrutiny from within the real estate industry, particularly among informed buyers, valuers, lenders and insurers,” Dr Wiart said.
Looking at past disasters, Tim Lawless, CoreLogic’s Asia Pacific Research director, explained that while Australian markets had been resilient to natural disasters to date, a large majority had occurred in areas with low population densities.
“Housing values in the worst affected areas of the Brisbane floods saw only relatively minor declines following the event and were fully recovered within the space of a few years,” he said.
“The worst affected areas of Northern Queensland following Cyclone Yasi and Cyclone Debbie saw a mild fall in housing values, but these impacted postcodes actually recorded a higher rate of house price growth over the three years following the cyclone than the regional Queensland average.”
However, he cautioned that the impact could be more substantial if weather-related events become more frequent or impactful.
“Or if insurance costs rose substantially, creating an additional disincentive to purchase in area that might be higher risk,” Mr Lawless said.
According to the IPCC, the world will be 1.5 degrees Celsius hotter by mid-2034, which could have devastating consequences on humanity.
“The alarm bells are deafening, and the evidence is irrefutable: greenhouse‑gas emissions from fossil-fuel burning and deforestation are choking our planet and putting billions of people at immediate risk. Global heating is affecting every region on Earth, with many of the changes becoming irreversible,” the United Nations secretary-general Antonio Guterres warned recently.
As such, the UN has called upon “immediate and decisive efforts” in pursuing the “most ambitious” path to prevent exceeding the 1.5 degrees Celsius threshold.
“We owe this to the entire human family, especially the poorest and most vulnerable communities and nations that are the hardest hit despite being least responsible for today’s climate emergency,” Mr Guterres said.
You can find out more about the IPCC report, the steps that can be taken to mitigate climate change, and green loans in the September edition of The Adviser magazine, out soon!
[Related: Firstmac launches discounted green home loan]
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