What Climate Change Means for Coastal Real Estate Values and Property Investors

What Climate Change Means for Coastal Real Estate Values and Property Investors

As a property investor, you understand how important it is to measure both opportunity and risk. This is particularly important in coastal cities where rising sea levels and damaging storms caused by climate change have had an effect on the real estate market. And although coastal cities will continue to remain popular with both permanent residents and vacationers, climate change will also continue to contribute to environmental issues in these locations. Here’s what you need to consider when you invest in coastal real estate.

Consider the facts

First of all, it’s important to understand the facts. In June of 2018, the Union of Concerned Scientists released a report that analyzed future flood risk and its effect on coastal real estate. The report determined that current value projections do not factor in risks such as increased flooding. As an investor, it’s essential to calculate how climate change can potentially affect property values and to develop mitigation strategies. If you’d like to know the flood risk of a particular address, enter the information at FloodiQ.com.

Consider the elevation

The 2017 Climate Science Special Report revealed that sea levels have increased by eight inches in the last 120 years. Three of those inches have happened since 1993. Some models predict that the sea levels will rise another four feet by 2100 – meaning many of our coastal cities would be underwater. And although real estate values in these communities continue to appreciate, they do so at a much slower rate than comparable homes in less vulnerable areas. In fact, Harvard researchers have revealed that homes located at higher elevations in these communities are appreciating at a much higher rate than those at lower elevations. 

Consider insurance costs and repairs

As an investor in coastal real estate, you also need to account for costs such as repairs and flood insurance. Unfortunately, insurers only recalculate prices annually and do not factor in long-term models. In addition, FEMA does not account for the accelerated risk of climate change, even as extreme weather and record floods become more common. As an informed investor, it’s up to you to factor climate risk into your investment strategy.

Consider property tax costs

Finally, coastal communities can expect to see taxes rise as a response to climate risk. The same 2018 report from the Union of Concerned Scientists suggests that waterfront communities will face increases in reconstruction costs at the same time that tax revenue decreases as a result of homes being destroyed and residents moving away. As the tax base shrinks and repair costs rise, investors can expect property tax rates to increase significantly. 

Consider working with a luxury management company

Working with a management company that has decades of experience and is well-versed in coastal real estate can be a great benefit to those who invest in these coastal communities. If you’d like more information about what a luxury property management company can do for you, please contact Agent Property Management at 949-518-1899. Our team of expert property managers is standing by to answer all your questions.