As the world gets warmer and the weather becomes more extreme, climate change impacts real estate markets in various ways. From rising sea levels to flooding to fires, these natural disasters are taking a toll on homes and property owners.
Climate change has already significantly impacted real estate in the United States. The country’s average temperature is rising, which could severely affect home prices and the economy. Additionally, extreme weather events are increasing, which could lead to canceled events or evacuations.If these events occur more often, the demand for properties could decrease as a result. As a result, real estate companies may need to reduce their prices or even close their doors altogether.
In fact, a University of Colorado study found that homes in areas where the sea level is expected to rise were, on average, sold for 7% less than similar properties nearby.
This blog will further explore the influence of climate change on real estate.
The real estate industry, like other industries, is not immune from the impacts of changes in the climate. The severity and frequency of natural disasters, such as wildfires, floods, hurricanes, and droughts, have significantly increased recently because of climate change. In the real estate industry, the climate is profoundly affecting the property’s value.
Properties in areas prone to natural disasters are becoming less desirable and more difficult to sell due to safety concerns. Insurance costs are also rising exponentially in these areas due to higher risks of damage from natural disasters.
Climate changes also have significant implications for commercial properties. As businesses become more aware of their carbon footprint and environmental impact, they are increasingly looking for commercial spaces that are environmentally friendly or sustainable. Let us look at the common impacts:
First, rising sea levels pose a threat to properties located in low-lying coastal areas. According to a study by Zillow, nearly 2 million homes in the United States are at risk of being flooded by 2100 due to rising sea levels caused by climate change. This can significantly impact property values in these areas, as buyers may become less willing to invest in properties that are vulnerable to flooding.
Rising sea levels, extreme weather events, such hurricanes and wildfires, result in a higher risk of damage as a result of climate change. Extreme weather can decrease property value and lead to unwanted financial costs. For example, the damage caused by Hurricane Katrina in 2005 resulted in a loss of $40 billion in property value in New Orleans alone.
Another impact of climate change on real estate is the increased demand for properties designed to be resilient to extreme weather events. As buyers become more aware of the risks associated with climate change, they are looking for properties built with materials and designs that can withstand the effects of extreme weather. This has increased demand for properties constructed to green building standards, such as Leadership in Energy and Environmental Design (LEED).
Real estate developers are likewise seeing the impact of climate change and developing their developments to be more sustainable. For example, new properties will have features like rainwater harvesting systems, energy-efficient appliances, and green roofs.These features reduce the impact of the development on the environment and make it more attractive to buyers looking for sustainable properties.
Another way that real estate is being impacted by climate change is through changes in zoning regulations. As the risks associated with climate change become more apparent, local governments are implementing zoning regulations that require new developments to be built in areas less vulnerable to climate change’s effects. For example, some cities need new buildings to be built on higher ground to reduce the risk of flooding.
Finally, the impact of climate change on real estate is also being felt through changes in the insurance industry. Insurance companies are gradually becoming less tolerant of the risks associated with extreme weather conditions. This can make it more difficult for property owners in high-risk areas to obtain insurance coverage, which can significantly impact property values.
In conclusion, climate change will likely significantly impact real estate in the US. As temperatures increase, coastal communities and some rural areas will see increased flooding, droughts, and wildfires. These events can cause significant damage to homes and businesses and lead to the displacement of residents. Additionally, changes in precipitation patterns may lead to increased flooding and landslides, which could also damage homes. However, some ways investors can ensure they are prepared for the future include understanding how climate change will impact real estate.