Study explores climate change’s effects on property

Exacerbated flood risks associated with climate change will affect future property values in vulnerable areas as the intensity and frequency of flooding increase

University of Otago researchers have launched a vital study into climate change that will leverage CoreLogic NZ’s property database to learn how future coastal flooding could impact residential property values.

CoreLogic joins the Reserve Bank of New Zealand as key partners on the three-year inter-disciplinary Strand Marsden Fund Project, which will help the top-tier research institute fill a knowledge gap around geographical information systems, geology, climate change, real estate and potential banking losses.

Since both property and financial markets are forward-looking, understanding the interplay between increasing flooding hazard, related financial losses, and when those losses will occur, has profound implications for homeowners, banks, insurers, and the stability of financial systems.

The associated risks are long-term and susceptible to the ‘tragedy of the horizon’ in that current decision makers fail to fully account for future risks.

The research framework learns from Māori traditions of considering multiple generations in decision-making and Māori investment principles where environment and people are integral to a systemic view of investment decisions.

Accordingly, this research will explore to what extent, and when, increasing flood frequencies will impact property values in New Zealand’s coastal cities given that markets are forward looking and have imperfect information.

Further, they will examine if there are flow-on effects of these losses on the stability of domestic banking system. New approaches to answering these questions will be adopted by an interdisciplinary team of experts in geographical information systems, geology, climate change, real-estate and banking.

CoreLogic NZ Country Manager Simone Moors says the partnership provided University of Otago academics with access to approximately 30 years’ worth of housing data, providing researchers with extensive and timely property information.

“By supporting such critical fields of academic study, we’re acknowledging the important role this partnership plays in supporting climate change research,” she says.

“Through study, academics have the potential to implement change, inform property and policy decisions and potentially improve climate-related risk management practices.”

CoreLogic NZ Head of Research Nick Goodall says it was critical to support research into property and peripheral sectors such as banking and finance, property development and valuations, and public sector policy.

“Our strength lies in the power of our data – we bring together hundreds of diverse data assets, which we clean, match and synthesise. We offer our clients the most comprehensive property-level insights available in New Zealand,” he says.

“Providing academics with access to one of New Zealand’s most authoritative sources of housing statistics and housing-related data provides an opportunity for innovative research that will explore new methodologies, test theories and investigate the relationship between housing markets and other factors such as climate change.”