$25bn in Australian dwellings exposed to high coastal risk – CoreLogic

by Mina Martin29 Mar 2022

Increasing storm surges and coastal erosion could potentially impact $25 billion worth of Australian residential coastal property, CoreLogic has estimated.

The findings, published in CoreLogic’s inaugural Coastal Risk Scores for Financial Risk Assessment white paper, measured the potential impact of climate change over time using a new proprietary coastal risk score, which evaluates combined coastal risks based on compounding storm surge and change in coastline, with the latter also implicitly considering ongoing rising sea level trends.

The risk-score methodology draws on three decades of shoreline movements and advanced location analytics to calculate and assign a coastal risk rating for 98% of Australian residential property. The properties are classified into five categories: no risk, low risk, medium risk, high risk, and very high risk.

The analysis classified more than 900,000 dwellings 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 properties were valued at $5.3 billion and $19.6 billion, respectively.

Across the states, analysis showed that Queensland has the highest concentration of properties at “very high” risk for the number of both individual houses and units, due to the Sunshine and Gold Coast’s densely populated coastlines.

New South Wales, Tasmania, and South Australia were also found to have a very large number of individual houses classified as being at “very high” coastal risk. 

The top 10 suburbs around Australia with the most value at risk were Paradise Point (Gold Coast City, QLD), Cronulla (Sutherland, NSW), Port Melbourne (Port Phillip, VIC), Manly (Northern Beaches, NSW), Aspendale (Kingston, VIC), Runaway Bay (Gold Coast City, QLD), Brighton (Bayside, VIC), Caloundra (Sunshine Coast Regional, QLD), Collaroy (Northern Beaches, NSW), and Golden Beach (Sunshine Coast Regional, QLD).

Pierre Wiart, CoreLogic’s head of consulting and risk management and report author, said the impact of climate change on Australia’s coastal erosion and rising sea levels was alarming and required urgent attention.

“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,” Wiart said. “Consequently, credit risk and long-term loans are directly 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. 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.”

Tim Lawless, CoreLogic research director, said the trend for coastal living has accelerated over the past two years, drawing more people to the country’s premium coastal, river, and harbour-front suburbs, resulting in unprecedented increases in housing growth rates.

“Spectacular views, lifestyle appeal, and limited supply has long attracted a premium for Australia’s best coastal properties,” Lawless said. “In the past two years, however, there has been a broad demographic shift where more Australians are prepared to consider housing options outside of the capital cities. Working from home has been a catalyst of this trend, with more people basing themselves in regional locations during the pandemic.”

The trend enormously benefited Queensland’s Gold Coast and Sunshine Coast, recording annual median value increases of 33% and 34.4%, respectively, in the 12 months to January.