- CoreLogic has launched a new Coastal Risk Score metric for assessing coastal properties
- It has found over 900,00 dwelling fall under 'at risk' categories
- Paradise Point has over $1.4b of property at risk
Storm surges and coastal erosion could impact up to $25 billion worth of Australian residential costal property, warns a new report from CoreLogic.
The property data and analytics company has recently released its new Coastal Risk Scores for Financial Risk Assessment whitepaper. In this, a new Coastal Risk Score – a tool that measures the potential impact of climate change – is heavily utilised.
The risk score itself combines coastal risks based on storm surge (rapid erosion) and change in coastline (slow erosion). The latter also implicitly considers ongoing trends in rising sea levels. 30 years of analytics allows the coastal risk rating to be applied for almost all properties.
CoreLogic’s head of consulting and risk management, Dr Pierre Wiart, said the recent damage caused by events in south east Queensland and NSW was a timely – and tragic – reminder of devastating extreme events can have on Australian people and property.
“In the next three decades, coastal risk will crystallise, with the tangible effects of climate change already being felt in most parts of Australia,” Dr Wiart said.
Dr Wiart said the new risk score would inform future buyers, current homeowners and financial services sectors such as insurers and lenders about the potential impact of climate-related coastal risks.
“This is leading to direct physical and financial consequences.
“Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, home loan viability and insurance premiums.”
“Understanding the coastal risk associated with those properties is important to every owner, potential buyer and ultimately our property and financial sectors that are supporting the expansion of new coastal properties in number and in value,” he said.
Dr Wiart added that consequently credit risk and long term loans are impacted by these natural trends.
“Equally, for any financial institution, it is important to evaluate the potential downturn in property values or the concentration of a portfolio at risk,” said Dr Wiart.
“Increasing coastal risk is also adding pressure on insurance. Property owners face ballooning insurance premiums and restricted insurance coverage, together diminishing their insurance affordability and protection of their significant assets.”
The risk score explained
Under the Coastal Risk Score, properties are placed into one of five categories, from No Risk to very High Risk.
Very High Risk entails that dwellings are likely to be impacted by coastal retreat within the next three decades, along with being at risk from significant storm surges.
Over 900,000 dwellings fall into one of the four ‘at risk’ categories with 12,694 houses and 9,441 units under High or Very High. These properties are valued at $24.9 billion.
Which suburbs at are most risk?
Queensland has the highest concentration of properties falling under ‘Very High’ risk for both houses and units, due to the densely populated coastline along the Sunshine Gold Coasts.
New South Wales, Tasmania and South Australia also have a significant number of houses under ‘Very High’ coastal risk, however, Queensland and New South Wales dominate the top 10 suburbs by value.
In number one spot was Paradise Point on Queensland’s Gold Coast, which had the highest volume of vulnerable detached houses. This 6.4 square kilometre area has residential property valued at $1.47 billion – the highest concentration of wealth in an area subject to high coastal risk.
Cronulla, Manly and Port Melbourne also rank highly due to the high density of highly valued apartments near the coast.
Along with being close to the coast, all of the top ten suburbs have relatively fast coastal retreat figures, and have high property values.
”Armed with this information, businesses can employ a sophisticated approach to quantifying climate change impact, enhancing risk management and making data-led decisions – each of which can also benefit their customers,” said Dr Wiart.
”While this is potentially surprising or even confronting information for homeowners, this important data will allow consumers to make the best property decisions, and help them plan for long-term wealth preservation,” Dr Wiart concluded.