Many owners of baches, cribs and beach houses around New Zealand’s coast will find their homes uninsurable within 20 years.
That’s the grim reality of the rising sea level caused by climate change – it’s not 100 years out, or even 50. It’s a mere two decades.
Researcher Belinda Storey of Climate Sigma says while there are many unknowns in determining the effects of climate change, scientists are “very confident” that the sea level around the country will be up by a minimum 10cm in 20 years. NIWA predicts double that sea-level rise.
“Even just a 10cm level of sea rise has a major impact on the probability of an event, and that’s what will see insurers pull out of beach properties,” Storey says. “Ten centimetres is enough to have a 1m storm surge reach right over the top of the normal tidal ranges.
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“In Wellington, a 10cm rise in sea levels means a property with a 1 per cent chance of an event per year (such as a one-in-100-year flood) now has a 5 per cent chance of an event – it’s five times more likely to occur. And at 5 per cent, insurers won’t be there any more. That would be too much risk for them to carry. So, some time during the next 20 years, you won’t be able to insure the house.”
Storey says Auckland has a bigger tidal range so many storm surges are likely to be absorbed within this range. “But again, some locations will lose insurance sooner than others.”
A 2019 NIWA report, Coastal Flooding Under Future Sea Level Rise, co-authored by hazards analyst Ryan Paulik and principal scientist Dr Rob Bell, predicted a rise of more than 10cm by 2040: “There is near certainty that the sea will rise 20-30 cm by 2040.”
NIWA coastal hazards scientist Dr Scott Stephens also says the incremental rises in the sea level around the coast in the next two to three decades will drive big increases in the number of times coastal areas are likely to flood. Regions with small tidal ranges, such as Wellington and along the East Coast, will experience greater flooding frequency in the future.
“Sea-level rise will not necessarily manifest itself as large catastrophic events, but will bring ‘nuisance’ flooding more often,” Dr Stephens says.
The NIWA report showed 72,000 New Zealanders are currently exposed to present-day extreme coastal flooding, along with about 50,000 buildings, worth $12.5 billion.
“The most important message from this research is that we really need to get on and get our planning in order because we haven’t got long before we are really feeling the impacts of it,” says Dr Stephens. “Areas, like the south coast of Wellington are already feeling it now, and will experience it more often.”
FEW GUIDELINES FOR BACH BUYERS
If you are looking at buying a bach on the beach in the near future, it’s likely you are looking for guidelines on rising sea levels and insurance risk – and found very little.
That’s because there are very few council guidelines. At most, you may find mention of a one-in-100-year floodplain on the LIM report, or a draft policy on coastal hazards, but odds are you will ignore that, because most people do.
While we might find that surprising, Storey doesn’t: “People tend to be very good at ignoring low-probability events,” she says. “This has been noticed internationally, even when there is significant risk facing a property. Although these events, such as flooding, are devastating, the low probability makes people think they’re a long way off.”
And it’s Storey’s job is to estimate just how much that risk is undervalued, and how much of a price discount could be expected, relative to the risk.
“It is known, in Miami that the sea level rise will overwhelm some locations, and the value of those properties could be expected to go to zero. Right now, they were expected to be down 30-40 per cent, but they are only down 3 -4 per cent.
“Even when there is significant risk, or an event that decimates house prices immediately, property prices rebound in seven years, often sooner.”
Storey quotes the example of the 2800 properties on the Kāpiti Coast that received notices in 2012 that their properties were being zoned as an area deemed to be at risk of erosion and sea-level rise. Each property had a coastal hazard warning added to their LIM report, which angered residents.
“A colleague, Ilan Noy, Chair of Disaster Economics at Victoria University studied house prices carefully, before, during and after the ensuing legal process that followed that announcement. There was a perception that property prices would change immediately, but they didn’t. There was no evidence house prices had responded to the hazard notices (or their subsequent removal).” (The council has since withdrawn warnings from many property LIMs following appeals.)
The researcher says historical evidence is likely to be patchy, and people have short memories. “Once you are in that home you really don’t want to talk about it.”
Storey says councils want to be able to communicate the risk, but legal challenges, such as the Kāpiti Coast District Council appeals, have had “a chilling effect”.
NIWA scientists talk about an “urgent need for national flood risk maps” that collate all the research available. “We need accurate and comprehensive information about the impact and costs of flooding today and under different climate change scenarios so everyone can plan and adapt,” says Paulik.
WHAT INSURERS SAY
The Insurance Council of NZ says rising sea levels will continue for many decades and the only uncertainty is the rate of change.
Chief executive Tim Grafton says people purchasing a beach house close to the high-tide level must expect that over time the property will be subject to increasing damage, with the impact varying in different parts of the country.
Because insurance is renewed on a year-to-year basis, the risk is constantly reviewed and premiums and excesses changed as required. But at some point a property can become uninsurable.
“It is foolhardy to just transfer the risk to your insurance, because the risk itself doesn’t go away.”
Grafton says insurers will accept and price that risk based on available data and actual events, which will help determine the probability and potential impact of a flood event in any given year. Multiple sources provide this data, including councils, Land Information New Zealand, computer modelling, floodplain, hydrology and topography data, and the location of a property relative to sea level.
And it’s not just a question of insurance – getting a 20- to 30-year mortgage for beach houses can be problematic. “Modelling expertise and risk management are not solely the domain of insurers,” says Grafton. “Banks also model and look at their exposure over the term of a loan. It’s my view that it’s likely we will see banks offering much shorter terms in higher risk areas, maybe 10 to 15 years rather than 20 to 30.”
Grafton says with a shorter term, the loan becomes less affordable (repayment rates are higher). This will impact on demand for that property and its subsequent value.
“We know there are many multimillion-dollar properties close to the high-ide level – (purchasers) of most of these would need a mortgage.
“If you are using all of your own money to purchase a beach property, you need to be looking very carefully at that purchase, and what its value will be over time.”
Grafton says councils around the country are looking seriously at these issues, and the Climate Change Response (Zero Carbon) Amendment Act 2019 has a focus on adaptation (making changes to minimise the impact of rising sea levels). But central government also needs to be in the picture as councils come under pressure financially.
“If we start to look at adaptation early on, we can avoid some of these problems in the future.”
‘PUT THE BRAKES ON COASTAL DEVELOPMENT’
Dr Bell says it’s important for councils addressing coastal adaptation to prioritise the areas most at risk, but also to undertake regional 100-year risk assessments to inform where land-use planning restrictions are put in place to limit future intensification – even if coastal flooding is some years away.
“We need to put the brakes on development in coastal areas, even if areas may not be impacted for a few decades – given the sea level will continue rising,” he says.
Flooding caused by rising sea levels won’t only affect houses within a few metres of the sea. It’s about a property’s height above (or below) sea level. Even houses far inland can be be flooded, and Storey says they are often affected by water rising up through the ground because it has nowhere to go
“You do get a lot of freshwater flooding from a storm surge.”
QUESTION OF LIFESTYLE
If you are a bach owner, not all is lost. Storey says there is value in being able to live in a beach house in the interim.
“Even though there won’t be any capital gain, the property still has a value. In another extreme example, residents of a small seaside town were told their seawall would be dismantled in 26 years. Everyone thought house prices would collapse. They dropped 40 per cent, but they didn’t go down to zero. There were still people prepared to buy.”