Coastal property owners warned of rising climate-related risks

The property market continues to hold up favourably across most of the country, but a succession of extreme weather events may be taking the edge off in many popular locations.

Idyllic seaside and riverside locations may not be as picture-perfect as they first appear, with storms causing unprecedented coastal erosion and flooding.

Maralyn Luchetti and her partner bought their dream home directly overlooking the ocean north of Wollongong three years ago and thought they were prepared for the worst.

“We were aware that it was a coastal erosion area when we bought it,” she said.

“The geotech reports made it seem as though it would be a problem in about 10 years.

“But then within months of us moving in, there were a few big east coast lows with very big seas, very big rain events, and so this property is affected not just by big waves, it’s also affected when there is water saturation of the clay soil. That tends to destabilise the cliff.”

climate house maralyn

New home owner Maralyn Luchetti moved in just before a series of east coast lows hit the region.(Justin Huntsdale: ABC Illawarra)

There are plans to build a protective seawall, but it is complicated and expensive work.

“Basically we have been told it will cost about $65,000 to get to the stage of a development application — that’s how much it will cost me to get to talk to council, which really annoys me,” Ms Luchetti said.

Prestige housing market firm for now

Houses on a cliff edge in the northern Illawarra region.

Many homes north of Wollongong sit close to cliff edges.(ABC Illawarra: Justin Huntsdale)

Storm damage to properties on the New South Wales coast is common, yet Mattias Samuelsson from Ray White Helensburgh says it is not yet having a noticeable impact on prices in his patch.
“Obviously we are being asked the question a bit more, but I haven’t seen any impact on values of properties,” he said. 

“People are still buying, properties are still being sold, people are still drawn to this lifestyle regardless of the risks.

“The risk has always been there but, with the recent storm activities, slippage around the coastline, buyers are definitely more cognisant of it.

“We are getting asked the questions about geotechnical risks a lot more often. I guess it’s inevitable.

“Newer homes tend to be more resilient as they’re built to a higher standard.”

climate house Mattias

Real estate agent Mattias Samuelsson says newer homes tend to be more resilient.(ABC Illawarra Justin Huntsdale)

Prices fluctuate, like the weather

While prices are holding up on this section of the coast, Eliza Owen from CoreLogic says it is a different story in other parts of the country.

“I think it is fair to say that areas with increasing levels of extreme weather events are going to see property values impacted long term, especially where properties are not built to resist incidents of fire or flood,” she said.

Units are more likely to hold their value compared to houses. 

Water covers a ferry terminal ramp

Flooding in Brisbane in February 2022.(ABC News: Hilary Whiteman)

“When we looked at the housing market in the week of the Brisbane floods, for example, we found that markets where you have high-end apartment buildings on the Brisbane River might have their prices far less impacted than low-lying detached housing in low socio-economic areas,” Ms Owen observed.

“That might be because with a tall, high-rise apartment building, only the car park or the basement, for example, is affected.”

Insurance costs

At present, no region in Australia is uninsurable, but a growing number of home owners are unwilling or unable to take out flood or storm insurance due to the prohibitive costs, with some households asked to pay tens of thousands of dollars a year.

This comes after record payouts.

“Flooding is one of the costliest extreme weather events in Australia and, right now, there are around 230,000 properties in Australia that face a one-in-20, or 5 per cent, risk of a catastrophic flood each year,” a spokesman from the Insurance Council of Australia (ICA) said.

“More than half of these properties are in New South Wales.”  

An ICA report found that, in 2022 alone, more than 300,000 disaster-related insurance claims were lodged, costing $7.28 billion.

A man looks at a flooded street

While not on the coast, Lismore in northern NSW is subject to regular flooding.(Getty)

About $6 billion of the losses were for the major floods in south-east Queensland and northern NSW.

Australia’s major banks have undertaken modelling to determine the risk climate change-related weather events pose to their mortgage portfolios, putting it in the tens of billions of dollars in the more severe scenarios.

Call to action

Andrew Dyer, manager of land, planning, hazards and regulatory at IAG, said it was too early to be sure exactly how much extreme weather was pushing up insurance costs but there were worrying signs.

“We had the Black Saturday bushfires then, straight off the back of that, we had three years of quite extreme flood events,” he said.

“Certainly, it’s hard to draw any inference around a trend, but we have seen a couple of quite extreme years.”

Andrew Dyer from IAG

Andrew Dyer from IAG is calling for urgent action to stop the construction of homes in high-risk zones.(John Gunn: ABC News)

In the face of more frequent extreme weather events, Australia’s largest insurance company is calling for urgent preventative action to help bring down premiums.

“What we really need to be doing is to get ahead of the problem, and that means we need to stop building new communities in harm’s way, putting dwellings in high-hazard risk zones,” Mr Dyer said. 

“I don’t think it’s acceptable that we expect the problem to go away or to be handled by insurance.

“It’s fundamentally a problem of addressing the underlying risk through either mitigation or, in the most extreme cases, we have to ask ourselves about the long-term viability of some of these pockets that are extremely impacted, and that may mean developing community-adaptation plans over 10, 20, 30, 40 years to relocate some of these properties.”

Retiring properties

In Wollongong, the council has been buying back individual properties for more than three decades. 

“Council has purchased somewhere around 86 properties since about 1990,” Lord Mayor Gordon Bradbery said.

“They were identified in flood studies and things of that nature, so we are continuing to do that, but it’s very expensive to be fair to those whose properties they voluntarily put up for sale, or are prepared to sell. It’s a costly exercise.”

Gordon sits in a chair, smiling and wearing a dark grey suit, white shirt and dark tie.

Wollongong Lord Mayor Gordon Bradbery says a lot of buyers make decisions on bright sunny days.(Justin Huntsdale: ABC Illawarra)

The council program is largely funded by the state government at a time when it is also facing a critical housing shortage. 

“The pressure is on us to release more land and we’re having to say no or identify the constraints and leave it to those who purchase and the developers to mitigate or work with those risks,” the mayor said.

“A  lot of people have purchased land in Wollongong on clifftops, next to waterways and, as I say, they make decisions on bright sunny days.”

Those decisions could have potentially devastating consequences as coastal areas are increasingly impacted by intense storm activity.

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