Storm surges and coastal erosion could wipe out $1.47 billion worth of properties at Paradise Point on the Gold Coast, according to a new report.
CoreLogic’s inaugural white paper on Coastal Risk Scores for financial risk assessment found that around $25 billion of Australian residential properties were at high coastal risk, with Paradise Point topping the list.
The Gold Coast suburb had the highest concentration of real estate wealth in an area of just 6.4 km², with 406 homes and 43 frontline apartments.
The report found that around 20% of the suburb’s housing stock is high-risk, which equates to 40% of the suburb’s total residential value.
CoreLogic’s director of advisory and risk management and author of the report, Dr Pierre Wiart, said severe weather posed a significant risk to the Australian property market.
“Coastal risk has far-reaching implications for the nation’s real estate market and its supporting financial sector, including property valuations, home loan viability and insurance premiums,” Dr Wiart said.
“Understanding the coastal risk associated with these properties is important for every owner, potential buyer and ultimately our real estate and financial sectors which support the expansion of new coastal properties in number and 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 coast.
According to the white paper, coastal risk includes the combined effect of storm surges (rapid erosion) and shoreline modification (slow erosion). Characteristics that the top 10 suburbs share include their proximity to the coast, low elevation, the fastest coastal retreat numbers, and high land values.
More than 900,000 dwellings are identified as falling into one of four “at risk” categories, with 12,694 houses and 9,441 units classified as high or very high risk of coastal exposure.
The properties are valued at $5.3 billion and $19.6 billion respectively, meaning around $25 billion of Australian coastal residential properties are at risk.
CoreLogic’s analysis showed Queensland had the highest concentration of very high-risk properties by number of detached homes and units, due to the densely populated Sunshine and Gold Coasts.
However, New South Wales, Tasmania and South Australia also had a large number of single-family homes classified as very high coastal risk.
Dr Wiart said the risk of severe weather events would impact insurance premiums.
“Credit risk and long-term lending are directly impacted by these natural trends,” he said.
“Similarly, for any financial institution, it is important to assess the potential decline in real estate values or the concentration of a portfolio at risk.
“The increase in coastal risks also increases the pressure on insurance.
“Homeowners face inflated insurance premiums and limited insurance coverage, which decreases the affordability of their insurance and the protection of their important assets.”
CoreLogic research director Tim Lawless said more people than ever are choosing to live in coastal areas and need to consider the risks.
“Spectacular views, lifestyle appeal and limited supply have long attracted a premium for Australia’s best coastal properties,” Mr Lawless said.
“However, over the past two years there has been a broad demographic shift where more Australians are willing to consider housing options outside of capital cities.
“Working from home has been a catalyst for this trend, with more people moving to regional locations during the pandemic.”