Why wealthy beach house buyers are starting to worry

Some potential property buyers looking at coastal and waterfront destinations are starting to ask questions about whether the homes they are interested in could be affected by the changing climate.

Some buyers are keen to know whether they are looking in a flood area, who will pay for seawalls to address coastal erosion, and if weather events could affect their property’s capital growth. A handful have changed their purchasing decisions in response.

Industry experts emphasised that not all or even most potential coastal buyers ask these questions, as many are wealthy and focused on the lifestyle that a beach house offers.

It comes as the federal government’s Climate Risk Assessment report this week warned that if populations remain as they are today, more than 1.5 million people will experience sea level rise and coastal flooding risks by 2050.

But locations on the water have been some of Australia’s most profitable for property sellers, separate research unrelated to the climate this week by property research firm Cotality found.

The 10 local government areas where home sellers made the biggest paper profits in the June quarter included Kiama on the NSW South Coast, the Byron shire in northern NSW, Cottesloe in Perth, Victoria’s Surf Coast, Sydney’s Waverley council which includes Bondi Beach, Sydney’s Northern Beaches and Woollahra council on Sydney Harbour. In these areas median profits ranged from $575,000 to $758,000.

The figures measure only property sales, not climate risk. But Cotality head of Australian research Eliza Owen said climate change could affect future property buyers’ decisions.

“Sometimes in the data, it’s hard to know what the exact impact is of extreme weather events,” she said this week. “If you’re looking at parts of northern NSW for example, it tends to be more the lower socio-economic pockets that have struggled to rebound.

“It could influence prestige property-buying decisions, and potentially even some divestment from luxury coastal markets … [and] inland tree-change areas that are subject to more intense summers as well.”

Buyer’s agent Peter Kelaher, managing director of PK Property, mentioned the storms and erosion that have affected Sydney’s northern beaches in the past. He said potential buyers were asking questions, and some decided not to buy a particular property.

“It’s pretty big in relation to seawalls: ‘Who’s going to pay for it, who’s going to compensate for it, what happens – am I buying a waterfront property and it’s not going to be waterfront later, it’s going to be water?’” he said.

“A lot of people on the northern beaches especially around Collaroy and Newport are concerned about erosion.

“They just are very wary about so many storms that have happened.”

He said when buyers are purchasing on the beach, they ask about erosion, and contact the local council.

“They’re multimillion-dollar properties, and they’re afraid of losing their capital growth,” he added.

“They just want to know if the majority of people along the seawall are prepared to put money in for the seawall, and they want to look at quotes, who’s involved.

“Some of them just go, ‘No, I’m just not going to buy it.’”

He said other buyers did not mind and were willing to take risks.

Ray White Byron Bay sales director Damien Smith said some buyers were asking about flooding, but it was rare to get these questions.

“It has to be turning some buyers off,” he said. “That’s a question that people tend to ask, are we a flood area?”

Smith said those looking to buy into beachfront areas most at risk were primarily putting lifestyle first.

“It’s people with a reasonable amount of wealth are buying those properties and it’s definitely not worrying them too much. They all have the smarts to know what to do about it,” he said. “In some of those areas that could be subject to oceans rising, it’s more about the status of where it is.”

Further south, GSC partner and mortgage broker Matthew Turner worked with buyers in Victoria’s Geelong and Surf Coast region. He has seen a couple of clients decide not to go ahead with mortgage applications due to high insurance costs.

“[Buyers] haven’t been not able to get insurance, but the premiums are higher. I’ve had a couple of clients who will push back … because of cost. ‘If we have to have this much insurance we’re not going to go ahead with the application’,” he said.

But most were focused on lifestyle over the climate crisis.He said some would even push ahead with purchasing a home when unable to get home insurance because of climate risks to the property, though this was rare.

Turner was concerned underinsured buyers could be caught out if climate change made their homes unlivable.

“I don’t think there’s enough understanding about what the actual risks are.”