Property prices along New Zealand’s coastline have grown substantially over the past year, with Coromandel prices rising by 15.2% for the 12 months ended January 2021 – all despite the ever growing threat of coastal erosion, sea level rise, and poor insurability.
QV manager David Nagel said that people “seemed to have failed to heed the warnings” about the risks of purchasing property on the coastline, and a major risk is that banks would stop funding the purchase of coastal properties, which would cause “havoc” in the market.
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CoreLogic’s research director Tim Lawless said that in places like Australia, the threat of natural events and climate change hasn’t been having much of an impact on prices either – that is, until the very real impact could be felt firsthand.
“Consumers are responding to climate risk in different ways,” Lawless commented.
“We’re not seeing much impact on property values from climate risk in the major city centres yet. But we are starting to see more examples of properties being affected by climate change, where there were properties literally falling into the ocean due to coastal erosion.
“When we start to see these real-life examples of properties being affected by climate change, I think it definitely starts to become a lot more real for prospective buyers.”
Asked about potential rises in property prices, over 20 QV consultants surveyed across New Zealand earlier this year pinpointed coastal areas as the regions where prices were most likely to go up over 2021.
Nagel said buyers should always seek advice before buying a property on the coast and do proper due diligence, particularly in areas where insurance might be more difficult to obtain.
Tim Lawless said this poor insurability might translate into house prices further down the line, though it is too early to tell what – if anything – will have a substantial cooling impact on the property market.
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“We might start to see property values through additional insurance costs,” Lawless said.
“As we do start to see this risk being measured more effectively and those costs being passed onto homeowners through higher insurance premiums, then that could flow through into a natural disincentive for some buyers.”
“Just make sure you’re going into these transactions with your eyes open, doing your due diligence and accessing the risks prior to signing on the dotted line,” Nagel concluded.
“What you should be doing is visiting your local council, getting as much information as you can and making an informed decision when buying real estate.”