Tempted by decrease costs and a pleasant river view? Homes on the market in a flood zone are round 10% cheaper than surrounding areas, in accordance with new analysis. Nevertheless, the decreased price ticket is just not value the additional threat and might burden consumers with long-term insurance coverage prices.
Researchers examined residence gross sales information from the Richmond space on the outskirts of Sydney, together with 2019 and 2023 flood maps for the area. They discovered a ten.8% value low cost within the AEP 100 flood zone, 4.4% within the AEP 500 flood zone, and none within the AEP 1000 flood zone.
AEP or “Annual Exceedance Likelihood” is used to specific the probability of a flood occurring in a given space annually. AEP 100 is a 1% likelihood or a 1-in-100-year flood threat, AEP 500 is a 1-in-500-year flood threat, and AEP 1000 is a 1-in-1000-year flood threat.
Lead writer Affiliate Professor Music Shi from the Faculty of Constructed Atmosphere on the College of Know-how Sydney (UTS) mentioned digital flood threat maps have formed folks’s perceptions of flood threat, nonetheless low-probably threat is usually dismissed, and maps will be misinterpreted.
“Residence consumers typically assume {that a} “1-in-100-year flood threat” means flooding will solely happen as soon as each 100 years, when in actuality it means there is a 1% likelihood of such a flood occurring in any given 12 months,” he mentioned.
“The prospect of a flood occurring at the least as soon as in an 80-year lifetime is 55% for a 1-in-100-year flood and 15% for a 1-in-500-year flood. The probability of experiencing such devasting floods over a life span is far larger than folks would possibly assume.”
The research reveals that individuals are likely to ignore flood threat past the AEP 500 flood threat zone. This may be harmful, as excessive rain occasions, corresponding to these just lately witnessed in Spain that resulted in a devastating dying toll, are rising because of local weather change.
“In Australia, multiple in 10 homes in Australia are located in flood zones. Flooding from intense rainfall and overflowing rivers is the most typical and costliest pure catastrophe,” mentioned Affiliate Professor Shi.
“Extra residents are utilizing digital flood maps to raised perceive their flood threat, and plan for extreme climate occasions. Nevertheless, our research reveals that past a sure threshold, folks are likely to ignore the chance, which may result in insufficient preparation for floods.”
The research, ‘Cognitive limits of perceived flood threat on residential property values’, with co-authors Dr Mustapha Bangura and Affiliate Professor Sumita Ghosh from UTS, was just lately printed within the Worldwide Journal of Catastrophe Danger Discount.
The researchers discovered the price of insurance coverage for a home in a flood zone is a major monetary burden. In Richmond, median priced properties within the AEP 100 zone have an estimated flood premium doubtlessly as excessive as $4,606 yearly, in comparison with comparable properties in a no-risk zone.
Residential properties uncovered to flood threat are overwhelmingly overvalued, particularly in coastal areas, the researchers warn, as property value reductions don’t compensate for the extra insurance coverage prices payable.
As local weather patterns intensify, understanding flood threat is changing into important for each homebuyers looking for to make knowledgeable decisions and policymakers aiming to safeguard communities and handle the impression on actual property markets.