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.

But this flat bit of land was hard-won by early settlers, who essentially terraformed a wetland into a place for life and industry to proceed.

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.

The risk of flooding has long been a fact of life here, as in many coastal communities across the country. But increasingly volatile conditions due to the changing climate may mean more serious, and more frequent, floods.

Many people only realise the seriousness of the climate crisis when they go to pay their insurance premiums or get the house valued.

In South Dunedin, insurability is already a very heavy word.

“Insurability is a fearsome word,” said Doig. “There are some real inequities around it, too. There are posh places going up down on the esplanade – people who know what the risks are. 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.

As a finance educator, he dwells on the borders between money matters and green solutions – a space he calls “climate finance”.

Now, along with a team from a broad range of disciplines such as real estate, finance, climatology and hydrogeology, he has launched an investigation into the link between house prices and climate risk.

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 of the changing climate are likely to keep those prices headed 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.

Nick Goodall, head of research at property data company CoreLogic, forecasts a gradual change to how Kiwis approach climate risk when looking into property. Photo: Supplied

For largely working class communities like South Dunedin, more floods may mean less equity and less 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.

And the issues at play in South Dunedin are likely to become relevant in other parts of the country as the years go by.

No property in New Zealand is more than 130km from the sea, and some of the most desirable ones are almost in it. At least, they were desirable when they were built. Now it may be a different story as insurance premiums begin to rise and the future becomes more and more uncertain.

To try and nail down this uncertainty, the research team used data provided by property data company CoreLogic.

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.”

That means the classic Kiwi bach might be harder 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.

Matthew Scott covers immigration, urban development and Auckland issues.

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