As part of its strategic partnership with global reinsurer Munich Re, CoreLogic International has analysed Victoria’s residential property climate hazard and risk exposure.
According to the research, almost 9 per cent of Victorian properties are at very high risk of climate hazards.
CoreLogic Head of Consulting and Risk Management Solutions Dr Pierre Wiar said the research also revealed a further 8 per cent of Victorian households were at high risk of climate hazards.
“This is equivalent to a combined estimated property value of $277 billion at risk.” Dr Wiar said.
“Like most Australian states and territories, Victoria’s diverse landscape is vulnerable to severe weather events such as bushfires, floods and coastal erosion.
“Future scenarios indicate that both bushfire and flood risks are likely to be on the rise across the regions due to drier environments but also increasing precipitation, albeit separately.”
Bushfire hazards are significant throughout the state, with high-risk areas on the outskirts of Melbourne’s, particularly to the city’s north.
“While most parts of Victoria face a moderate to high bushfire risk, the risk is highest around Melbourne’s north-east between Melbourne and the Yarra Ranges, from Ballarat to the border of the Lerderderg and Wombat State Parks, and the Great Otway National Park,” Dr Wiar said.
The study found from Swan Hill to Echuca and Shepparton were at risk of flood due to the Murray River, while the flat landscape of Melbourne and its surrounds creates a flood risk from the Yarra, Maribyrnong and Werribee Rivers.
“However, accurate future flood projections can be tricky due to conflicting forces at play, namely the relative impacts of drought and precipitation,” Dr Wiar added.
Under extreme future scenarios, rising sea levels are also anticipated to affect many areas of Victoria.
“Victoria is already feeling the effects of coastal erosion, with the Victorian Government providing funding to tackle the problem at beaches such as Apollo Bay, Lakes Entrance and Mallacoota. Our research shows that rising sea levels are likely to exacerbate coastal erosion in many parts of the state,” Dr Wiart said.
The CoreLogic research analysed more than 2.5 million Victorian residential properties to assess climate hazard ratings and risk scenario outcomes appended at property level.
A range of climate risk scenarios were modelled and outlined Victoria’s hazard profile and overall risk level for properties exposed to bushfire, drought, precipitation and sea level rise. It quantified the value and volume of properties exposed to different climate hazards and assigned standardised risk ratings.
“Phenomena like rising sea levels, coastal erosion, bushfires and floods can present a major risk, with potential impacts likely ranging from reduced asset value and credit losses to financial losses due to damaged property and infrastructure,” Dr Wiart said.
CoreLogic said it was supporting government and businesses to advance their understanding of the potential impact of climate change on the property market by creating a concurrent view of natural hazards and estimated property values.
The hazards can be mapped and can allow for targeted approaches to risk management and customer education.
The new research comes only weeks after CoreLogic assembled a panel of influential experts from Australia and New Zealand for its virtual event Moving ahead on climate change: Tackling climate risks in financial services, with participants reaching the consensus that cross-sectoral collaboration would be key to effectively managing impacts of climate change.
“While no one knows exactly what tomorrow will bring, access to the right data can provide a strong foundation for informed decision-making in uncertain times.
“Business leaders and decision makers, for example, may be better equipped to assess climate hazards when they have data that drills down to the level of individual properties. Now, these types of game-changing insights are about to be available in Australia and New Zealand.
“Armed with this information, businesses can employ a sophisticated approach to quantifying climate change impact, enhancing risk management and making informed decisions – each of which can also benefit their customers,” Dr Wiart said.