As Australia grapples with the escalating impacts of climate change, the property market is on a collision course with a potentially catastrophic future. Despite warnings from the government and experts about the looming threats, buyers continue to invest in high-risk suburbs, driving up property prices in areas identified as climate disaster zones.
The Australian Government’s inaugural National Climate Risk Assessment, released this week, presents a sobering forecast. It estimates that property value losses could escalate to an astonishing $611 billion by 2050 if climate change continues unchecked. This report underscores the vulnerability of over 1.5 million Australians to rising sea levels, bushfires, floods, and extreme storms by mid-century.
Ray White Group’s chief economist, Nerida Conisbee, highlights the disconnect between the growing climate risks and current buyer behaviour. “This national report makes clear the scale of the challenge,” she says. “Yet when we look at how property buyers are currently behaving, climate risk does not appear to be a major factor in decision-making.”
The Climate Council’s 2024 report, “At Our Front Door,” identified 85 suburbs facing significant climate risks. Conisbee’s analysis of 64 suburbs with sufficient data reveals a surprising trend: 58 per cent of these high-risk areas recorded positive price growth over the past year, with an average increase of 5.8 per cent, closely mirroring the national market.
In South Australia’s Adelaide Hills, suburbs such as Stirling, Heathfield, Crafers West, and Aldgate, where nearly every home is at extreme bushfire risk, have witnessed price growth of up to 12.5 per cent, with median values surpassing $1.3 million. Similar trends are observed in New South Wales, with high-value coastal and bushland areas like Palmers Island, Crangan Bay, East Wardell, Seahampton, and Bucketty attracting 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.”
However, the data also reveals fractures in the market. While some high-risk suburbs thrive, 42 per cent experienced price declines, particularly in lower-value coastal communities and certain prestige markets. Several bushfire-prone and flood-exposed suburbs in New South Wales recorded price falls, indicating that parts of the market may be beginning to account for climate risks.
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, Conisbee notes. In some instances, insurers are withdrawing coverage altogether, leaving owners with “stranded assets” – properties that become nearly 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.”
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.
For now, Australia’s property market remains resilient, even amid escalating climate risks. But experts caution that this could change quickly. “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 pressing question remains: how long can high-risk suburbs defy the warnings before the market reaches its tipping point?