How Climate Change Can Affect Real Estate Investment

How Climate Change Can Affect Real Estate Investment

Climate change is a huge concern in our time. It has become such an evident issue that even governments and other stakeholders across the globe boost their concerted efforts of responsible use of the environment. Effects of climate change, such as adverse and rare, weather elements, flooding, hurricanes, extremely high and low temperatures, among others are already having a major impact on various industries including real estate. Here is an overview, according to experts, on how climate change is, directly and indirectly, affecting real estate.

  • Accumulating losses of real estate property

Adverse weather conditions, especially extremely high precipitation and hurricanes, have a huge impact on the structural integrity of real estate properties. Buildings in the path of major hurricanes in the United States suffer partial or total destruction. In the state of California alone, for instance, rising sea levels, extreme weather elements, coastal erosion, extreme floods, and wildfires cause an average of $3.9 billion worth of damage annually.

  • Reduced property demand in some areas

Properties located in states that experience extreme weather elements, especially hurricanes and high rainfall, have been determined to suffer low demand. This is even as anticipating property owners shy of purchasing properties from those areas for fear of suffering losses. States such as those located along the East Coast, including Florida, are particularly affected by annual hurricanes.

The reduced property demand in some areas is accompanied by hiked prices of properties located in states where the weather is favorable. This is because more anticipating homeowners choose to purchase property in those areas, thereby leading to increased demand.

In addition, real estate engineers are expected to up their game as far as design and construction of homes and properties are concerned. Buildings are expected to be constructed with reinforcements in order to withstand the extreme forces of weather such as hurricanes.

  • Increased property insurance

Property insurance companies have also been largely affected by extreme weather conditions brought by climate change. The increased risk of homes being exposed to adverse weather conditions and thereby suffering destruction has led to insurance companies to rethink the factors to consider in risk calculation. The cost of insuring a property located in an area that is highly prone to adverse climate change is exponentially high. Homeowners are there for paying the cost to secure homes in such areas.

Losing real estate property, reducing the demand, and increased property insurance are only a few effects of climate change. As the situation worsens as will the real estate industry.