Climate change and its associated risks have a direct impact on Australia’s property market and lending landscape.
Risks related to flooding, bushfires and extreme heat are increasingly reflected in home values, mortgages and insurance, according to national assessments.
What happened?
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 nearly 2,000 homes were flooded during Lismore’s 2022 floods.
As detailed analysis by the Climate Council and PropTrack shows, flood risk alone costs about $42 billion in lost property value across the country.
Meanwhile, the federal National Climate Risk Assessment warns that climate impacts could cost the Australian property market up to A$571 billion by 2030, with losses expected to reach A$770 billion by 2100.
Why does rising costs matter?
More than 1.5 million Australians are expected to live in high- or very high-risk coastal areas by 2025 due to extreme heat, flooding and rising sea levels, problems exacerbated by human impacts.
An estimated 650,000 homes and businesses are already at high risk of one or more hazards, accounting for almost 1 in 23 properties.
The Climate Council said the biggest losses were related to flood risk in low-income areas.
Climate change and energy minister Chris Bowen told Broker News: “It’s clear from this climate review that we have a lot at stake as a country.”
Similar pressures are occurring in the United States, where climate-driven insurance risks are also reducing home values and reshaping lending decisions.
Rising premiums and reduced coverage are forcing insurers and lenders to reassess long-term risks in disaster-prone areas. Losing affordable insurance can directly impact mortgage qualifications.
What measures have been taken to deal with extreme weather?
Economic losses from extreme weather have tripled, according to the Insurance Council of Australia.
Relying on hazard mapping, updated building standards and enhanced resilience planning are the best ways to protect properties from long-term risks.
At the same time, taking climate-friendly measures, such as installing solar panels, can reduce a home’s pollution impact while making it more resilient to extreme weather.
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