Climate change warning: Shorter mortgage loans, higher insurance for beachfront property

Across the country, billions of dollars are invested in coastal property that could be uninhabitable in the next three decades.

The global sea level has already risen almost 20 centimetres since the industrial age, and is expected to rise between 20 to 30 centimetres by 2050.  

Those rises could have some devastating impacts on Kiwis, with a new report showing even a one-metre sea level increase could cost the country $34 billion in commercial and residential building damage. 

Another report from 2018 warned that all property in the Wellington suburb of Petone could be completely uninsurable by 2050. 

Petone isn't the only suburb facing this, with experts urging homeowners not to take the threat of sea level rises, erosion and frequent flooding too lightly. 

Niwa's Dr Rob Bell told Newshub people need to be aware of the risks that come with buying or owning a coastal property. 

He said for people who are willing to spend a lot of money, things like sea walls might be realistic, but they are far from foolproof. 

"Putting in a sea wall to stave off the day when the houses might be threatened, that in turn has side effects like losing the high tide beach."

He said that could cause tension between people who like using the beach and homeowners who are trying to protect their properties. 

Dr Bell said while some homes are already at imminent risk, most have time to prepare a strategy. 

He acknowledged that where people live is often strongly linked with their surroundings and some people don't want to give that up. 

"One of the really crucial societal elements that we will have to talk to communities about is place-based attachment."

Dr Bell said while it will take years for sea levels to rise, issues with getting insurance or a mortgage are a lot closer. 

Insurance Council CEO Tim Grafton echoed Dr Bell's concerns, saying while it is inevitable that some homes will become uninsurable, the more immediate issue is whether banks will grant a long-term mortgage. 

"What I will expect to see long before the water is lapping around the house, is that the bank will say, 'our mortgage is for five or 10 or 15 years, it's not for 20 or 30 years'.

"As soon as you shorten the term of a mortgage, the number of people who can afford that diminishes."

Grafton said homeowners should make sure they are aware of any problems they might face in the future.

"I don't think people should be panicked, but I think there is a very clear realisation by people who live on coastal communities that there is an ever-growing risk around sea-level rise and climate change."

He said planning and acting now is the best way to avoid significant property price slumps. 

"There inevitably will be places in New Zealand where getting insurance is not going to be possible." 

New Zealand Bankers' Association chief executive Roger Beaumont confirmed that banks might shorten mortgage for properties that are at risk. He also raised the issue of insurance, saying without insurance banks won't approve a home loan. 

"It's quite possible that in time banks could require more equity or shorter-term mortgages when considering lending on potentially affected coastal properties."

Beachfront sections 'still worth $6m'

But those warnings aren't putting people off beach houses, according to real estate agent Graham Wall. 

Wall told Newshub there is still strong demand for seaside properties, which sell for significantly more. 

"In places like Omaha, beachfront sections are worth $6 million and one section back they're worth $3 million and nothing has changed," he said. 

So why are Kiwis ignoring the warnings in favour of living right on the water's edge? 

While Wall admitted some people are in denial, he said most just seem to think the risks are worth it. 

"It's always been part of the Kiwi dream to live on the beach and I think people just believe it won't happen to them."

He said Te Awanga beach in Hawke's Bay is the only area where he's heard of people who are concerned about insuring their beach houses. 

Real estate agent Graham Wall says owning a beach house is the 'Kiwi dream'.
Real estate agent Graham Wall says owning a beach house is the 'Kiwi dream'. Photo credit: Getty Images

Will your insurance increase?

The country's largest insurers Vero and IAG, which own State, AMI and NZI, both told Newshub their premiums reflect the risk and therefore will increase as the risk to houses increases. 

IAG's climate and sustainability spokesperson Bryce Davies said eventually some houses will become uninsurable, but it won't happen overnight. 

"As the risk increases, and as a country if we do nothing about that risk, people will see the increasing risk reflected in the prices," he said. 

"At a point in the future, it is certain that parts of New Zealand will be underwater that aren't today, and therefore, will be uninsurable." 

Vero's executive consumer and insurance manager Sacha Cowlrick said they are "constantly assessing" the impact of climate change. 

Cowlrick said anyone purchasing a property in a coastal area should make sure they fully understand the risk of flooding or seawater damage, as well as what work is being done by the local council. 

Potential buyers should "explore their insurance options before committing themselves to buying".