Why you need to consider climate change before you buy property

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As a kid growing up in Sydney's north-west, we often used to waterski on the Hawkesbury River. The drive to Windsor took us through areas that often flooded after heavy rain. No matter - at the time it was mostly open farmland.

Fast-forward to 2022 and the Hawkesbury area has grown up. Newly built homes in the river's surrounding suburbs often command million-dollar price tags.

The nature of the neighbourhood has certainly changed. But the lie of the land has not.

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Flooding still occurs in the area, though it's not impacting empty paddocks anymore. In March, residents around the Hawkesbury, including relatively elevated areas like McGraths Hill, were ordered to evacuate as Greater Sydney experienced a devastating "rain bomb".

The Insurance Council of Australia says the Hawkesbury-Nepean Valley has the highest single flood exposure in NSW, if not Australia.

That's because the river doesn't fan out as it approaches the coast. Instead it's hemmed in by sandstone gorges that trap and hold rapidly rising water.

This hasn't stopped residents buying in the region - or more land being released for development.

Today, the Hawkesbury-Nepean Valley includes some of the nation's fastest growing local government areas including Penrith City, home to 200,000 people.

It's easy to say residents who were inundated by the March floods should have been aware of the risks.

However, Angus Raine, executive chairman of the Raine & Horne Property Group, says: "No matter how much due diligence a buyer undertakes, you can never account for a one-in-100-year event. And some of the floods we saw in March 2022 were impacting areas that hadn't experienced flooding since the 1800s."

The trouble is that climate change means we're no longer looking at once-in-a-generation, or even once-in-a-century, events. NSW has experienced back-to-back flooding, with barely 12 months between disasters.

But on the other side of the country, Western Australia has sweltered through its hottest summer on record.

Only days before the March 2022 east coast floods, bushfires ripped through 60,000 hectares of regional Western Australia, destroying homes and endangering lives. It was a disaster reminiscent of the summer of 2019-20 when bushfires tore through 5.3 million hectares of NSW.

Home buyers unfazed

The Climate Council of Australia has warned for some time that we can expect an intensifying of extreme weather events. It means deadlier heatwaves, devastating droughts, more mega-bushfires and more intense storms.

It's a grim picture. Yet, Raine says, across the property market, climate issues are typically not even a secondary consideration among home buyers.

A CFA Member works on controlled back burns along Putty Road on November 14, 2019 in Sydney, Australia. Crews are working hard to gain the upper hand after devastating fires tore through areas near Colo Heights. Bushfires from the Gospers Mountain bushfir

"Bushfire tends to be a bigger threat in many areas than flooding. But homeowners can better prepare to protect their homes against bushfires.

"Risk mitigation measures may include having onsite water storage, ensuring hoses are in working order and keeping any foliage a safe distance from the house."

The upshot is that when it comes to bush blocks, Raine says, "buyers recognise the possibilities that they could be impacted by bushfires, but they're happy to back themselves".

Suburbs warm up

As lot sizes get smaller, green spaces dwindle, and established trees give way to concrete footpaths and bitumen roads, suburban areas are experiencing the urban heat island effect. This is where heat is trapped and intensified, raising temperatures by as much as 10 degrees relative to surrounding areas.

The heat island effect is expected to have a dramatic impact on our cities.

A study by Monash University for the Australian Conservation Foundation found the hottest summer days in Brisbane and Melbourne are expected to regularly reach over 40°C by 2060-80, and up to 50°C in Sydney. Already, Perth has seen a 50% increase in the number of heatwave days since pre-1980.

However, the prospect of having to deal with intense future heat doesn't seem to be swaying buyers' preferences.

heat island effect property climate change

"As yet, we haven't seen a movement of existing owners leaving inland areas such as Perth's eastern corridor to be closer to the coast because of climate change," says Damian Collins, managing director of Perth-based property firm Momentum Wealth and president of the Real Estate Institute of WA.

As is the case in the outer suburbs of many Australian cities, Sydney's west can sizzle in summer. Records tumbled in January 2020 when several neighbourhoods recorded temperatures approaching 50˚C.

This is the city's mortgage belt, popular among first home buyers. And, as Raine says, "in locations such as Sydney's western suburbs, buyers know they can pick up an air-conditioning unit at low cost".

It's not just about cheap cooling appliances. Another factor is at play. "The price point of the neighbourhood is why people buy there," says Raine.

Coastal areas battered

Escaping suburban heat can make coastal suburbs seem like a haven.

They can face problems of their own, though. On the NSW central coast, wild storms in 2020 caused significant beachfront erosion, leaving luxury homes teetering on cliff edges.

Collaroy-Narrabeen beach in Sydney's north is ranked Australia's third most at-risk area from coastal processes. It's been pummelled by a number of storms, including one in 2016 that saw a concrete swimming pool dragged into the ocean.

These events could be the tip of the climate change iceberg. According to Geoscience Australia, nearly 39,000 buildings around the Australian coast are located within 100 metres of "soft" shorelines and are at risk from accelerated erosion due to sea-level rise and changing climate.

This hasn't stopped coastal properties becoming prime real estate.

home insurance cover coastal erosion

"A beachfront home is an aspirational purchase," says Raine. "People often aren't thinking far ahead enough to be concerned about beach erosion that may be a possibility in the future. It's more about the lifestyle the property offers today."

Damian Collins agrees: "The risk of rising sea levels isn't driving a significant change in purchase habits." Nonetheless, he cautions, that "buyers who are looking to buy a property on low-laying land near a river or ocean will want to consider the long-term impact and associated risks this may pose to their property".

The Climate Council takes a considerably stronger view. It believes the property market is expected to lose $571 billion in value by 2030 due to climate change and extreme weather.

It says low-lying properties near rivers and coastlines are particularly at risk, with flood risks increasing progressively and coastal inundation risks emerging as a major threat by around 2050.

Professor Will Steffen, a climate commissioner, climate change expert and ANU emeritus professor, pulls no punches. "Climate change is playing out in real time here in Australia. We are dealing with a climate system on steroids," he says.

Eco-friendly features 

Back in Western Australia, Collins says the continuation of a warming climate may deter people from living in known heat corridors, though "we don't expect buyers to leave these areas completely".

Instead, he believes buyers may start to show a preference for smarter, eco-friendly home designs that reduce the impact of rising temperatures while protecting a property's livability.

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"We are definitely seeing a preference towards properties that are eco-friendly. Features like insulation and solar panels are becoming an increasingly important consideration for buyers.

"We're also seeing more emphasis on the design of homes, as this is something that is hard and expensive for owners to change further down the line. We will no doubt see buyers willing to pay a premium for more eco-friendly homes."

Raine agrees that home buyers are becoming more interested in features that can soften the blow of climate change.

"Solar panels are a popular feature because they have a tangible hip pocket benefit such as savings on electricity costs. Gardens with drought-tolerant native plants are popular, as are water tanks. On the flipside, expansive lawns that require constant watering and maintenance are becoming less popular."

New building codes

Given the extremes of weather we've seen in recent years and the destruction they can bring, Raine believes changes to building codes are inevitable. In many areas, installing rainwater tanks is already mandated by law for new homes, and owners of existing homes who retrofit water tanks can be eligible for council incentives.

"We've already seen that dark roofs (which absorb more heat) will be banned on all new houses in NSW," he says. "It's a quick win for the state government, and it's a change that won't even have an aesthetic impact on homes."

Like many people, he believes more could be done, such as extending eaves on westerly facing housing to reduce the solar load. More broadly, he says:

"We've got to start thinking like we live in one of the most arid countries in the world rather than basing our housing styles on the US and Europe."

What home buyers can do

Talk of climate change can sound like doom-bingeing, but home buyers need to be aware of the possible impacts on a property they're considering.

In particular, do plenty of research to understand the potential risks of flooding, bushfire or intense summer heat, bearing in mind these risks could increase over time. Check the likely insurance premiums on a property before you buy - you could be surprised how much it costs to protect the place.

heat sink climate change property blinds

It's also worth looking for features that can make the property more comfortable in summer. Raine says simple measures like window shades can help keep a property cool in summer without leaving an overheated power bill.

If you're buying in the suburbs, keep an eye out for homes on tree-lined streets or lots that have the space to accommodate shade trees.

A study by the infrastructure firm AECOM found residents in areas with a tree canopy can pocket annual savings of around $250 on power bills and enjoy a 10% uptick in home values.

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A former Chartered Accountant, Nicola Field has been a regular contributor to Money for 20 years, and writes on personal finance issues for some of Australia's largest financial institutions. She is the author of Investing in Your Child's Future and Baby or Bust, and has collaborated with Paul Clitheroe on a variety of projects including radio scripts, newspaper columns, and several books.

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