Will climate change force you to move?

Across the Tasman, worries about climate change affecting property prices are real.

When huge storms hit Sydney in 2016, houses and pools collapsed into the sea and more than 11,000 properties were damaged. Residents were warned that many insurers did not cover "actions of the seas”, and the NSW State Government encouraged people not to buy coastal homes, saying it was up to homeowners to make sure what their insurance policy covers.

Richie Merzian, director of the Climate and Energy Programme at the Australia Institute, says that when average temperatures climb 3 to 4 degrees above pre-industrial temperatures cities, entire coastlines on the continent will become uninsurable - by the private sector, at least - meaning the burden falls back to local or central government as the insurer of last resort.

READ MORE: Kiwi beach properties rising in value - and defying climate change fears

In New Zealand, scientists, central and local government and the insurance council are getting serious. One of the 12 national science challenges is researching the country’s resilience to natural hazards, including examining the price of sea level rise, looking at both the science and the social costs. NIWA’s Dr Rob Bell is programme leader and was the lead author for the Ministry of Environments 2017 guide on preparing for coastal hazards and climate change for local government.

Research estimates some 125,600 buildings, worth $38 billion, are at risk if sea levels rise by one metre: a rise of 0.2 to 0.3 metres is now certain in the next 20 years.

“The main effort is a helicopter view, nationally and regionally, for the hot spots with the biggest risk exposure to help councils get on with the job,” Bell says. “It will change district plans, and regional plans, but that’s a five to eight year time frame.

“There are already coastal setback planes in some properties today, but value is still determined by aesthetics. Until there are more flooding events, that is. There is research now [from Motu and Victoria University] on climate risk analysis and climate adaptation in housing pricing and insurance.”

For the curious, Waikato Regional Council interactive inundation tool lets users scroll rising sea levels to see which sections of the coast would end up under water. Bell says there are already pockets around New Zealand - parts of the Hawke’s Bay, low lying parts of South Dunedin, for example - which are high risk.

Councils like Thames Coromandel district (TCDC) have already started a three-year programme of detailed shoreline management plans to figure out risks and hazards and how they’ll be managed in the next 10, 50 and even 100 years.

TCDC coastal engineer Jan van der Velt says it’s not just sea level rises that pose a threat but also heavy storms, changing winds driving bigger king tides, and changing ground water levels.

“Any new infrastructure, for example storm water pipe design, is now tested against a two metre sea level rise. We can do many things, but finance - who’s going to pay? - that’s the tricky part.

“The initial reaction is, ‘What will it do to my property values?’. People still want to live on the beach and near the sea. Some places are thinking of managed retreat, and recent storms have woken people up.”

Some east Coromandel beaches have already had development setbacks extend from 50 metres from the front dune to 300 metres, but a trigger for action will be whether insurance companies are prepared to carry the risk for some properties. In the last two years, insurance companies paid out $226 million and $243 million for extreme weather payouts, while Treasury estimates put the cost of climate-induced events at a whopping $720 million for the decade to 2017.

The Insurance Council, whose members are very concerned about climate change, says that it’s time for both mitigation and adaptation such as improved stormwater systems, moving property away from coastal areas or flood plains and not consenting new builds there.

“It’s at a very formative stage at the moment, but over the last two to three years local councils have engaged in consultation,” says Insurance Council head Tim Grafton. “[Managed retreat] is definitely on the radar, but whether or not that is the solution you jump to first? It’s just one option. There are pathways, for example, planting for sand dune protection might protect for five to ten years, then a secondary option after that.

“It’s about adaptive pathways, on a case by case basis. It lets you spread the costs over time, but signals clearly the increasing risks and that’s helpful for people to know.”

Grafton points out that an insurance contract is a 12-month one, while mortgages are for longer periods of time. If insurers aren’t comfortable insuring, then banks, he says, may consider 10 or 15 year terms rather than the usual 30 years.

“Then maybe coastal property will become unaffordable, as repayment costs increase, people are over-extended to buy premium property and there are concerns about reselling. That will start to erode the value of property.”

With sea level rises now not considered accidents or unforeseen, damage from that is not insurable, Grafton says. Data-hungry insurers are well informed about the risks and using those data to calculate premiums.

“Today’s one in 100 year event will be a 1 in 50. And it doesn’t mean they’ll happen only once every every 100 years, they can occur today and next year.”