High coastal risk threatens $25b worth of Australian residential property
Increasing storm surges and coastal erosion has the potential to affect $25 billion worth of Australian residential coastal property, according to CoreLogic estimates.
The findings, published in CoreLogic’s inaugural Coastal Risk Scores for Financial Risk Assessment whitepaper, are based on a new proprietary Coastal Risk Score which measures the potential impact of climate change over time.
Dr Pierre Wiart, CoreLogic’s head of consulting and risk management and author of the whitepaper, says the impact of climate change on Australia’s coastal erosion and rising sea levels is alarming and requires urgent attention.
“In the next three decades, it’s expected that coastal risk will crystallise, with the tangible effects of climate change already being felt in most parts of Australia. This is leading to direct physical and financial consequences,” he says.
“Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, bank loan viability and insurance premiums.”
While coastal risk is to be found in a relatively narrow distance from the coast, Wiart says this is where a lot of residential wealth and high-density living are concentrated.
“Spectacular views and limited supply attract a premium for Australia’s best coastal properties,” he says.
CoreLogic’s Coastal Risk Score places properties into one of five defined categories, from no risk, low risk, medium risk, high risk through to very high risk.
Wiart says more than 900,000 dwellings are identified as falling into one of the four “at risk” categories, with 12,694 houses and 9,441 units categorised as being at high or very high risk of coastal exposure. The residential value of these properties is $5.3 billion and $19.6 billion respectively.
He says dwellings categorised as “very high” risk may be impacted by coastal retreat (a landward shift of the coastline caused by a long-term erosional trend or by sea-level rise) within the next 30 years and may also be at very high risk of significant storm surge impact.
Storm surge is an abnormal rise in sea level over and above the normal (astronomical) tide levels. It is caused by strong winds piling water up against the coast.
CoreLogic’s analysis shows Queensland has the highest concentration of properties at “very high” risk for the number of both individual houses and units, owing to the Sunshine and Gold Coast’s densely populated coastlines.
However, New South Wales, Tasmania and South Australia also have a large number of individual houses classified as being at “very high” coastal risk.
The whitepaper lists 10 suburbs around Australia with the most value at risk. Their common traits are their close proximity to the coast, low elevation, fastest coastal retreat figures and high property values.
Of the top 10 suburbs, Wiart says Paradise Point on Queensland’s Gold Coast has the highest volume of detached houses most vulnerable. As a consequence of their high value, estimated at $1.47 billion within 6.4km, no other suburb has such a high concentration of residential wealth subject to high coastal risk. About 20 per cent of the suburb’s housing stock is at high risk, equivalent to 40 per cent of the suburb’s total residential value.
Cronulla, Manly (Greater Sydney, NSW) and Port Melbourne (Victoria) also rank highly due to the high residential apartment value and density of apartment dwellings within close proximity to the coastline.
CoreLogic’s analysis draws on three decades of shoreline movements and advanced location analytics.
Its Coastal Risk Score methodology evaluates combined coastal risks based on compounding storm surge (rapid erosion) and change in coastline (slow erosion), with the latter also implicitly considering ongoing rising sea level trends.
Indeed, the United Nations Intergovernmental Panel on Climate Change (IPCC) report, published in August 2021, called out Australia’s rising sea levels, which are increasing at a rate higher than the global average.