Calm before the storm: Can we avoid extreme house price swings from extreme weather events?

Abstract

We wanted to assess if homeowners factor-in the warnings provided by scientists and the International Panel on Climate Change (IPCC) about the risk of SLR when purchasing a home. We examined how changes in policy direction within a single coastal community, Kapiti Coast, affected the way people made decisions on purchasing a home, to see whether prices of coastal properties change as property-specific risks of future SLR become available.

Owners decisions to sell their houses do not appear to have been be related to the placement of erosion risks on Land Information Memorandums (LIMs) in September 2012 or their removal in October 2014. Meanwhile, public disclosure of the future coastal erosion risk found on a property's LIM report had no statistically meaningful effect on house prices. Our evidence suggests that erosion risk information being placed in the LIM reports seemed to have had only a minor effect on property pricing.

An extreme price correction that will wipe out the wealth of many families, and possibly lead to banking instability through mortgage defaults, is in no one's interest. If we continue along the current path, without appropriate disclosures of the risks and with little government action to nudge us in the right direction, an extreme price correction seems almost inevitable.