Climate change and its related risks are directly influencing Australia’s property market and lending landscape.
According to national assessments, the risks associated with floods, bushfires, and extreme heat are increasingly being priced into home values, mortgages and insurance.
What is going on?
According to Broker News, climate-related risks are directly affecting Australia’s property market and lending landscape.
More than 3,000 homes were destroyed during the 2019-20 Black Summer bushfires, while almost 2,000 homes were inundated during the 2022 Lismore floods.
As detailed by an analysis from the Climate Council and PropTrack, the risk of flooding alone wiped an estimated $42 billion from property values nationwide.
Meanwhile, the federal National Climate Risk Assessment warned that climate impacts could wipe up to $571 billion from Australia’s property market by 2030, with losses projected to reach $770 billion by 2100.
Why are increasing costs important?
More than 1.5 million Australians are expected to be living in high or very high risk coastal areas by 2025 due to extreme heat, flooding, and rising sea levels — all of which are exacerbated by human influence.
An estimated 650,000 homes and businesses are already at high risk from one or more hazards, representing almost one in 23 properties.
The Climate Council said the biggest losses are linked to flood risks in lower income areas.
“One thing that is very clear from this climate assessment is that our whole country has a lot at stake,” Chris Bowen, the Minister for Climate Change and Energy, told Broker News.
Similar pressures have been seen in the United States, where climate-driven insurance risk is also driving down home values and reshaping lending decisions.
Rising premiums and shrinking coverage are forcing insurers and lenders to reassess long-term exposure in disaster-prone areas. The loss of affordable insurance can directly affect mortgage eligibility.
What is being done about extreme weather?
According to the Insurance Council of Australia, the economic toll of extreme weather has tripled.
Relying on hazard mapping, updating building standards, and increasing resilience planning are the best ways to protect properties against long-term risk.
Meanwhile, taking climate-friendly steps, such as installing solar panels, can reduce the polluting impact of a home while making homes more resilient against extreme weather.
Get TCD’s free newsletters for easy tips to save more, waste less, and make smarter choices — and earn up to $5,000 toward clean upgrades in TCD’s exclusive Rewards Club.