Otago University researchers examine property values and insurance premiums along the coast to reveal just how worried Kiwis should be.
The flat plains south of central Dunedin are one of the city’s main living quarters, but the sea also rolls in and takes up residence from time to time.
Eleanor Doig, chair of South Dunedin Community Network, said the last big flood was back in 2015, when she watched her community deal with a water level threatening to rise up and flow into more than 1000 homes and businesses.
“A lot of the houses where people we were supporting were living went under,” she said. “It was disastrous.”
Doig said around 60 percent of the people living on the flat of South Dunedin were renters. And with many people uninsured and landlords not always forthcoming in getting houses back to a liveable shape, it was massively disruptive to people’s lives.
Dense housing developments have long used the flat nature of the area to get a lot of people living in one space, often for cheaper prices than some of Dunedin’s more hilly environs.
This flat piece of land was fought for by early settlers who transformed a wetland into a place where life and industry could continue.
And proceed it did, with settlement in the area exploding around the Gold Rush of the 1860s and some of the country’s first Chinese communities calling it home.
But no matter how many roads and houses are papered over the top of it, its essential nature given out by nature when the land was wrested from the sea remains true – South Dunedin doesn’t drain easily.
Flooding has been a part of daily life in this area for many years. But increasingly volatile conditions due to the changing climate may mean more serious, and more frequent, floods.
Many people are unaware of the severity and importance of the climate crisis until they pay their insurance premiums or have their house valued.
In South Dunedin insurability is already a very strong word.
“Insurability is a fearsome word,” said Doig. “There are some real inequities around it, too. There are some very expensive places on the esplanade. People who know the risks. And then there’s Burt and Beryl who worked all their lives and have got a little cottage somewhere.”
Housing inequality and exorbitant prices locking people out of a place to live are already hot button topics in Aotearoa, but with so many of us living within sight of the ocean, how long will it be before climate change steps in and complicates things further?
That’s what University of Otago associate professor Ivan Diaz-Rainey and his team are looking to answer.
He is a finance teacher and likes to explore the boundaries between green solutions and money matters – a space he calls climate finance.
Together with a group of scientists from diverse disciplines such as finance, real estate, climatology, hydrogeology, and climatology, he launched an investigation into the connection between climate risk and house price.
The Strand Marsden Fund Project will run for the next three years, and involves academics examining housing data to see whether failing to account for future risks has the potential to destabilise New Zealand’s banking and finance industry.
They began with a pilot study in South Dunedin, where the higher chances of flooding have already discounted house prices by six or seven percent, although flooding probabilities are also determined by factors like infrastructure.
But the cumulative effects from the changing climate will likely keep these prices heading downwards.
“We may have more extreme precipitation at coastal properties, along with the subsequent connection between the water table and sea level rise,” he said. “The combination of these hazards is what really matters.”
What this means is that a one-in-100 years kind of flood may become more and more frequent.
“If you add these various components, by the middle of the century it might be a one-in-50 year event,” Diaz-Rainey said. “By 2070 it might be one-in-20, and by the end of the century it might be a one-in-five year event.”
He’s looking far into the future, but property is one of the longest-term investments Kiwis are likely to make.
“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 home owners, banks, insurers, and the stability of financial systems,” he said.
For communities that are largely working-class like South Dunedin it may mean less equity or financial freedom.
Doig and the South Dunedin Community Network want to see guidance from the Government on insuring properties built before they had good warning about the area’s volatility.
“It’s about how can we most protect the most vulnerable people in our community,” she said.
The issues that are being discussed in South Dunedin could be relevant in other parts as well in the coming years.
No property in New Zealand is more than 130km from the sea, and some of the most desirable ones are almost in it. They were attractive when they were built. As insurance premiums rise, and the future becomes more uncertain, it could be a completely different story.
CoreLogic provided data to the research team to help them understand this uncertainty.
CoreLogic head of research Nick Goodall said pairing the company’s data up with a group of data scientists and academics means they can say with more certainty what the impact of these events on house prices will be.
He thinks we will see change in the next 10 years when it comes to people being more mindful about climate risks when buying property.
“In the past, it was more common for the appeal of a beachside property to override the potential risk,” he said. “That might be starting to change as insurance companies are becoming more thorough in their estimations of the risk.”
This means that the classic Kiwi bach may prove more difficult to insure. And if people can get insurance, the likelihood of bad flooding every now and then may be worth putting up with if it’s a weekend getaway.
Its a different story for places like South Dunedin where many people’s full-time homes might one day be at the mercy of the sea.