A recent research by the Climate Council has warned that the value of real estate industry in Australia could collapse within the next decade if future governments fail to deal with the monster of climate change.
According to the research, the residential property value in Australia is expected to incur losses of up to $571 billion by 2030 as a result of harsh weather events, high insurance premiums as well as inundation of low-lying properties along the coastal lines.
All these equate to about 9 percent of Australia’s overall residential property value—to be wiped out and nearly the same amount that has already been lost in the existing real estate downturn, and which is expected to be the nation’s worst in recent history.
Remarkably, the losses may not be evenly distributed since only about 5-6 percent of property owners are likely to be affected by the dire effects of climate change.
As most insurance companies in Australia continue to redesign their risk strategies and tactics to effectively manage the inevitable extreme weather activities, the report forecasts that the overall cost of insuring properties especially those in the coastal areas could become highly unaffordable for at least one in 19 property owners, who would be expected to pay annual premiums at 1 percent of the total value of their property.
Another study carried out by the Actuaries Institute—actuaries refer to statisticians that calculate the risks due to insurers—has warned that at least one in 10 properties could be rendered uninsurable by the fall of this century due to the effects of climate change.
Karl Mallon, the report author and climate risk expert cautioned that insurance companies were continuously altering their risk strategies and this could end up hiking premiums aimed at tackling extreme weather events including floods, heat waves and rising sea levels.
“More and more Australians are going to struggle paying for home insurance. Based on current trends, it’s estimated that by 2030 at least one in every 19 property owners will find insurance premiums effectively unaffordable,” noted Dr Mallon.
“And for Australians able to afford paying for general insurance, the cover excludes damage from coastal erosion and inundation — events likely to become commonplace due to climate change.”
‘There are obvious real costs of failing to act’
Additionally, the report has warned that a further $4 trillion of our economic growth could go down the drain in the next 8 decades if greenhouse gas emissions don’t reduce.
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