Storm surges and coastal erosion has the potential to wipe out $1.47 billion worth of property at Paradise Point on the Gold Coast, according to a new report.
CoreLogic’s inaugural Coastal Risk Scores for Financial Risk Assessment whitepaper found about $25 billion of Australian residential property was exposed to high coastal risk, with Paradise Point at the top of the list.
The Gold Coast suburb had the highest concentration of property wealth in just a 6.4sq km area, with 406 houses and 43 apartments in the firing line.
The report found 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.
CoreLogic’s Head of Consulting and Risk Management, and report author, Dr Pierre Wiart said severe weather events posed a significant risk to the Australian property market.
“Coastal risk has far-reaching implications for the country’s property market and its supporting financial sector, including property valuations, home loan viability and insurance premiums,” Dr Wiart said.
“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.”
Other major coastal locations including Cronulla (Sutherland), Port Melbourne (Port Phillip), Manly (Northern Beaches) and Aspendale (Kingston) were also at very high risk due to their residential apartment value and density of apartments so close to the coastline.
According to the whitepaper, coastal risk includes the compounding effect of storm surges (rapid erosion) and the change in the coastline (slow erosion). The traits the top 10 suburbs share include their close proximity to the coast, low elevation, fastest coastal retreat figures and high property values.
More than 900,000 dwellings are identified as falling into one of the four ‘at risk’ categories, with 12,694 houses and 9441 units categorised as being at high or very high risk of coastal exposure.
The properties are valued at $5.3 billion and $19.6 billion respectively, which means about $25 billion worth of Australian residential coastal property is at risk.
CoreLogic’s analysis showed Queensland had 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, NSW, Tasmania and South Australia also had a large number of individual houses classified very high coastal risk.
Dr Wiart said the risk of severe weather events would have an impact on insurance premiums.
“Credit risk and long-term loans are directly impacted by these natural trends,” he said.
“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.”
CoreLogic Research Director Tim Lawless said more people than ever were choosing to live in coastal locations and they needed to consider the risks.
“Spectacular views, lifestyle appeal and limited supply has long attracted a premium for Australia’s best coastal properties,” Mr 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.”