Coromandel coastal property values are surging by as much as 66 per cent, new research by OneRoof shows. Despite a slowdown in sales volumes since 2015 and ever more strident warnings from official and industry sources of an increased threat from climate change, coastal properties are still rising in value – and in many cases becoming more upmarket.
Coastal property values are on the rise, increasing over the past four years by 35 per cent in Cooks Beach, 55 to 58 per cent in Whangamata and Whitianga, and 66 per cent in Waihi Beach.
In older beach spots like Whitianga, Pauanui and Cooks Beach only two in five of the properties carry a mortgage, suggesting longer-term ownership from the days when prices were nowhere near city levels.
Despite warnings on the risk exposure of many parts of the country to sea level rise, this is not reflected in buyer behaviour.
NIWA estimates 125,600 buildings, worth some $38 billion, would be at risk if sea levels rose up to one metre. Even with the new normal high spring tides, some 9000 homes are at risk.
Bayleys Mount Manganui agent Kay Ganley says most people are not aware of climate change risks, and beachfront is still sought after. “Most people think it’s not going to happen in their time. People are not aware of it.”
In Whangamata, First National’s Gordon Turner finds buyers are similarly unconcerned. “We don’t have that many beachfront sales come up, and I’ve not had one single person make a comment to me with regards to climate change,” he says. “It’s a volatile subject, but ignorance is bliss.”
Strong Warnings Are Being Ignored
Meanwhile, the Reserve Bank is clearly signalling to banks that their risk assessments now need to take into account sea level rises, as well as other climate change-related damage.
Right now, says Peter Thomas, BNZ’s chief credit officer, the bank relies on hazard information on a property LIM. But as insurers look more closely at risks, he expects that this will also extend into how loans are assessed.
“Much of the reliable data needed to make informed decisions is just now becoming available, and it’s realistic to consider the basis of assessment will change over the medium term,” Thomas says.
BNZ chief economist Tony Alexander says at some stage an event will change expectations. “Perhaps an ice-shelf collapse or permanent ponding of water following a substantial storm,” he says.
“Well before councils start talking about withdrawing services from low lying locations and placing special rates levies on coastal properties, well before insurance companies withdraw coverage for at-risk locations, the market will start pricing such properties lower. We are not there yet in New Zealand.”
“But very likely one day an event will occur which brings fear of the effects of rising sea levels. It is just a matter of time before the pricing responds for coastal houses – downward for those at inundation risk, but potentially upward for those on the coast at no risk.”
Insurance Council head Tim Grafton points out that an insurance contract is a 12-month one, while mortgages are for longer periods of time.
“If insurers aren’t comfortable insuring, then banks, he says, may consider 10 or 15 year terms rather than the usual 30 years. “Then maybe coastal property will become unaffordable, as repayment costs increase, people are over-extended to buy premium property and there are concerns about reselling. That will start to erode the value of property.”
With sea level rises now not considered accidents or unforeseen, damage from that is not insurable, Grafton says. Data-hungry insurers are well informed about the risks and using this data to calculate premiums.
“Today’s one in 100-year event will be a 1 in 50. And it doesn’t mean they’ll happen only once every 100 years, they can occur today and next year.”