Climate risk suburbs: The shocking truth about Aussie house prices

Australia’s property market is hurtling towards a climate reckoning, with billions of dollars in potential losses looming.

Yet, astonishingly, buyers are still flocking to high-risk suburbs, driving up prices in areas already flagged as climate disaster zones.

The Australian Government’s first-ever National Climate Risk Assessment, released this week, paints a grim picture of the future.

It warns that property value losses could reach a staggering $611 billion by 2050 as climate change intensifies.

The report highlights that more than 1.5 million Australians will face the impacts of rising sea levels by mid-century, alongside escalating risks of bushfires, floods, and extreme storms.

“This national report makes clear the scale of the challenge,” Ray White Group chief economist Nerida Conisbee said.

“Yet when we look at how property buyers are currently behaving, climate risk does not appear to be a major factor in decision-making.”

RELATED

The coastal suburbs that could disappear

$500bn wiped by 2030: These areas warned

Insurance companies’ new surveillance tactic revealed

Conisbee’s analysis of 85 suburbs identified in the Climate Council’s 2024 report At Our Front Door reveals a surprising trend: in areas where up to 100 per cent of properties face high climate risk, property prices are still climbing.

Of the 64 suburbs with sufficient data, 58 per cent recorded positive price growth over the past year, with an average rise of 5.8 per cent – closely mirroring the national market.

Buyers ignore the warnings

The findings are as baffling as they are concerning.

Suburbs like Stirling, Heathfield, Crafers West, and Aldgate in South Australia’s Adelaide Hills – where virtually every home is at extreme bushfire risk – saw price growth of up to 12.5 per cent, with median values exceeding $1.3m.

High-value coastal and bushland areas in other states – including Palmers Island, Crangan Bay, East Wardell, Seahampton and Bucketty in NSW, also showed strong buyer interest, despite their vulnerability to extreme weather events.

“Lifestyle continues to trump risk,” Conisbee explains.

“For many buyers, the appeal of scenic locations and premium amenities outweighs the long-term dangers of climate exposure.”

MORE NEWS: ‘Surprised’: RBA’s next move to shock Aussies

In Queensland, high risk areas included Groper Creek, Cunnamulla and Brookstead.

In Victoria, Hollands Landing, Manangatang and Shepparton ranked as the top three high-risk suburbs.

However, the data also reveals cracks in the market.

Forty-two per cent of high-risk suburbs experienced price declines, particularly in lower-value coastal communities and some prestige markets.

Several bushfire-prone and flood-exposed suburbs in New South Wales recorded falls, suggesting that parts of the market may be starting to factor in climate risks.

The hidden costs of climate vulnerability

While buyers may not yet be pricing in climate risk, the financial pressures on property owners in high-risk zones are mounting.

Insurance premiums in flood and bushfire-prone areas are skyrocketing, eroding rental yields and household budgets, Ms Conisee says.

In some cases, insurers are withdrawing coverage altogether, leaving owners with “stranded assets” – homes that are virtually impossible to insure, finance, or resell.

“Insurance is already becoming a major issue,” Conisbee warns.

“Rising premiums and out-of-pocket repair costs could eventually outweigh the lifestyle appeal that has so far driven demand.”

MORE NEWS: Childcare centres flood market as scandals spook owners

Looking ahead, several factors could accelerate a shift in buyer sentiment.

More frequent extreme weather events will directly impact liveability and safety.

Stricter building codes and planning regulations may increase construction costs in high-risk areas, while banks could tighten lending criteria for vulnerable properties.

A market on the brink

For now, Australia’s property market remains resilient, even in the face of escalating climate risks.

But experts warn that this could change rapidly.

“As financial pressures mount and climate impacts intensify, exposure to extreme weather may become the defining factor in Australian property markets,” Conisbee says.

The National Climate Risk Assessment has sounded the alarm. The question is: how long can high-risk suburbs defy the warnings before the market reaches its tipping point?

The post Climate risk suburbs: The shocking truth about Aussie house prices appeared first on realestate.com.au.