Climate Change A Factor When Buying A House
It is a proven fact that people want to live with like-minded people. That is why we tend to lean towards a neighbourhood where we feel similar-thought people are living. The latest factor to influence people into buy real estate in Canada, is – their belief in climate change.
Many believe climate change will affect economies and societies across the earth, and there are already signs that concerns are working their way into certain real estate prices.
Recently published research within the journal The Review of Regional Studies revealed that dwellings facing the big risk of flooding from an increase in sea levels sell for a reduction relative to risk-free properties.
For Savannah, properties liable to flooding for a rise in the water level of three feet or less sold at a 3.1 percent discount relative to dwellings deemed not in danger. Houses exposed to flooding for an increase in sea-level between three and 6 feet, however, failed to report a reduction relative to the risk-free properties.
A soon-to-be-published paper within the journal Review of monetary Studies offers some clues to the matter. Markus Baldauf of the University of British Columbia et al. analyzed legion residential transactions within Canada to see the impact of future flooding vulnerability on transaction prices.
Extreme weather, water level rise, melting of glaciers and ice sheets, flash floods, urban flooding, coastal flooding, erratic rains, droughts, burgeoning wildfires – the climatic disturbances are impacting us in very tangible ways. All this has severe implications for the critical estate sector, specifically with regards to properties located near the coast such properties must become tuned in to the danger related to purchasing such properties. Inside Climate News reports that rising seas have already eroded coastal property values from Maine to Mississippi by billions of dollars over the past decade as buyers pay less for homes in neighbourhoods where high-tide flooding is creeping in.
Preparing for the longer-term temperature change could be a reality, and any coastal city’s development plan must think about the potential damage it can cause to property and infrastructure. Developers will increasingly create fully elevated structures with the supply of electricity backup and generators on higher floors. This may end in higher construction costs and impact the pricing of such properties. Simultaneously, local administrations in coastal cities will make necessary provisions to shield the town and to handle future incidents of flooding. One solution is to place up barriers to accommodate rising sea levels, but this selection is dear. An alternative is to grow mangroves along coastal areas as they act as natural barriers to rising water levels.
Edmonton’s mapping of infrastructure showing at-risk points to flooding from storms as a valuable resource to Realtors and clients. Toronto, meanwhile, has charted 42 flood-risk neighbourhoods, but many Realtors and their clients are not aware that they exist. “If a municipality or a regional government sort of a province isn’t releasing flood map data, then obviously we can’t ask the customer to beware.”
Some Facts -
According to a study conducted by the University of Chicago and the University of British Columbia, a buyer’s belief in climate change is having an impact on the prices of a particular neighbour.
A waterfront property in Montreal comes with a discount, and prices of houses in flood-risk areas are comparatively lower because people there believe that climate change is a reality.
As per the study, homes in non-believer neighbourhoods sold for 7% more than homes from believer neighbourhoods.
Disputing The Facts -
Lorenzo Garlappi, UBC Sauder School of Business’s finance professor and co-author of the study, does not agree with this study.
Reasons -
- The study was conducted in the US market and cannot be said to define Canadian intentions as Canadians are not that easily swayed by beliefs.
- The price differentiation is prominently visible only in owner-occupied units.
Alternate Scenarios -
Garlappi also said that unless the climate change debate really picks up and changes people’s perception, this conclusion might not carry much weight in Canada.
On the other hand, if all the people are equally affected after acknowledging the impact of climate change, then their study will hold no relevance.
Alternatively, if the Government decides to take concrete action against oft-occurring natural disasters, then the entire dynamics would change.
FOR FURTHER INFORMATION OR IF YOU HAVE ANY FURTHER QUESTIONS PLEASE DO NOT HESITATE TO CONTACT ME.
AJ LAMBA
(REAL ESTATE COACH & BROKER OWNER)
