Reserve Bank paper sees potential total wipe-out of house values for some Auckland homes exposed to rising seas and 1-in-100 storm, with 25% at some risk; Annual insurance roll-over the hair trigger
Banks just grabbing while they can and too bad about the human carnage. If they can all charge fees then that class will be ok and the rest of us and as you say, particularly women and children, often unpaid and also having a number of roles and workload being the worse of with “big brother” invading their lives and behaving ever more badly and negligently. I feel awful for the youth with this all going on and being so at the mercy completely corrupt and incompetent leadership interested only in themselves and their own obsessions and “well-being”. Not one of the so called leaders are addressing any of this democratically or advising the citizens. They’re just making things worse for everyone. Good for you for daring to speak up. I’m surprised you haven’t been smeared as a racist Nazi yet. 😂 Mind you you’re not an easy targeted woman for the uncivilised cowardly brutes.
So irritating the authorities have known of these risks for 30 years. Why are they acting so slowly is what I want to know. As with everything they need to be held to account for what they are responsible for.
Another excellent article Bernard. Just one issue. Much of the flooding in Auckland on 27 January was not on or near a flood plain. It was caused by insufficiently designed stormwater systems. So local government has a responsibility, does it not?
Coincidentally, we just got the annual insurance letter compete with a roughly 50% increase (!) in our premium - on our house at the top of a hill and completely unaffected by the recent weather. Fortunately we are blessed with the time to call the insurance company, and negotiate a significant discount, and the money to pay it anyway. But, without that sort of privilege, we would have been in trouble. I think it's coming for a large number of Aucklanders sadly.
If the 2022 stress tests were accurate, I'm not so worried about the banks. They already modeled a 47% drop in house price, with a stock crash and a cyber war thrown in for fun. So the 50% climate change reprice has already been pretty well kicked around.
As you point out Bernard, it's only just coming onto the homebuyer-in-the-street's radar.
I can see a day in the perhaps not so distant future where a home mortgage is priced out in a bespoke manner depending on where the property sits and what the risks are. LVRs will differ by postal code. As could available interest rate and term. You really want to live in THAT house?? Okay, this is what it is going to take.
It's good to get the discussion out there, even though we are lacking in good answers.
> We are also aware that as flood risk increases, the financial system is likely to face simultaneously a broader range of climate-related risks: domestic transition risks from factors such as more stringent emissions pricing
Never fear, the banks will never have to worry about this actually ever happening
I completed a hazard assessment for my property as part of due diligence, including use of Auckland Council's GeoMaps.
My insurance company's online climate risk tool further declared my property 'Low' risk when I first applied for house & contents insurance (prior to settlement).
It's hard to think I could have reasonably been expected to do much more at the time - or that I should face severe financial hardship in the event the property became worthless due to changing climate.
Is there any equivalent or precedent that can shed light on likely outcomes please Bernard?
Hi Bernard, excellent article and podcast. It’s great to hear somebody in New Zealand talking about the changing climate and the role of insurance.
I see this in California where houses in areas of fire risk cannot get fire cover as part of their insurance. Likewise earthquake insurance here is very expensive and people often go without it. A ticking time bomb!
Im interested to hear your thoughts on NZ implementing (or extending?) a version of EQC for flood and storm damage? Its apparent to me that there are parts of NZ that insurance wouldn’t cover for earthquakes without the existence of EQC.
It's harsh and needs to be fine tuned but this kind of thing does need to happen as part of our adaption. Building on flood pains has caused a huge amount of damage globally in recent decades. Those houses on eroding cliffs need to be included too.
Given how the government and RBNZ have intervened in the economy during the pandemic, I have a feeling I know who’s going to be left holding the bag when the risk reassessments come through.
Thanks Bernard a really interesting piece. I think another consideration is what impact rising sea levels may have on Public land. Private homeowners individually may be at low risk - i.e. Top of a hill etc but we know that large tracts of the roading/train network in Auckland is on flood plains (or in fact on very low lying reclaimed land). Being at the top of the hill isn't much help if you can get there. In the same way, large numbers of remote costal settlements and properties will become uninhabitable just because they won't be accessible via low lying public land.
Banks just grabbing while they can and too bad about the human carnage. If they can all charge fees then that class will be ok and the rest of us and as you say, particularly women and children, often unpaid and also having a number of roles and workload being the worse of with “big brother” invading their lives and behaving ever more badly and negligently. I feel awful for the youth with this all going on and being so at the mercy completely corrupt and incompetent leadership interested only in themselves and their own obsessions and “well-being”. Not one of the so called leaders are addressing any of this democratically or advising the citizens. They’re just making things worse for everyone. Good for you for daring to speak up. I’m surprised you haven’t been smeared as a racist Nazi yet. 😂 Mind you you’re not an easy targeted woman for the uncivilised cowardly brutes.
So irritating the authorities have known of these risks for 30 years. Why are they acting so slowly is what I want to know. As with everything they need to be held to account for what they are responsible for.
Another excellent article Bernard. Just one issue. Much of the flooding in Auckland on 27 January was not on or near a flood plain. It was caused by insufficiently designed stormwater systems. So local government has a responsibility, does it not?
Coincidentally, we just got the annual insurance letter compete with a roughly 50% increase (!) in our premium - on our house at the top of a hill and completely unaffected by the recent weather. Fortunately we are blessed with the time to call the insurance company, and negotiate a significant discount, and the money to pay it anyway. But, without that sort of privilege, we would have been in trouble. I think it's coming for a large number of Aucklanders sadly.
If the 2022 stress tests were accurate, I'm not so worried about the banks. They already modeled a 47% drop in house price, with a stock crash and a cyber war thrown in for fun. So the 50% climate change reprice has already been pretty well kicked around.
As you point out Bernard, it's only just coming onto the homebuyer-in-the-street's radar.
I can see a day in the perhaps not so distant future where a home mortgage is priced out in a bespoke manner depending on where the property sits and what the risks are. LVRs will differ by postal code. As could available interest rate and term. You really want to live in THAT house?? Okay, this is what it is going to take.
It's good to get the discussion out there, even though we are lacking in good answers.
> We are also aware that as flood risk increases, the financial system is likely to face simultaneously a broader range of climate-related risks: domestic transition risks from factors such as more stringent emissions pricing
Never fear, the banks will never have to worry about this actually ever happening
So... Buy Bitcoin ? and live in a caravan/house boat on your uninsured flood zone of a land bank. ?
Is there an insurance for renters to get rescued from ‘acts of banks’?
I completed a hazard assessment for my property as part of due diligence, including use of Auckland Council's GeoMaps.
My insurance company's online climate risk tool further declared my property 'Low' risk when I first applied for house & contents insurance (prior to settlement).
It's hard to think I could have reasonably been expected to do much more at the time - or that I should face severe financial hardship in the event the property became worthless due to changing climate.
Is there any equivalent or precedent that can shed light on likely outcomes please Bernard?
Hi Bernard, excellent article and podcast. It’s great to hear somebody in New Zealand talking about the changing climate and the role of insurance.
I see this in California where houses in areas of fire risk cannot get fire cover as part of their insurance. Likewise earthquake insurance here is very expensive and people often go without it. A ticking time bomb!
Im interested to hear your thoughts on NZ implementing (or extending?) a version of EQC for flood and storm damage? Its apparent to me that there are parts of NZ that insurance wouldn’t cover for earthquakes without the existence of EQC.
It's harsh and needs to be fine tuned but this kind of thing does need to happen as part of our adaption. Building on flood pains has caused a huge amount of damage globally in recent decades. Those houses on eroding cliffs need to be included too.
Have we found a use for climate change skeptics? Can they buy the houses? Perhaps we need a climate skeptics investment fund? Or is that big oil?
Given how the government and RBNZ have intervened in the economy during the pandemic, I have a feeling I know who’s going to be left holding the bag when the risk reassessments come through.
The Reserve Bank also asked the banks late last year to assess their sensitivity to a major rainfall event in Auckland.
Well whoever at the RB arranged this should get a bonus for their foresight.
Ha and I just read the next paragraph
Thanks Bernard a really interesting piece. I think another consideration is what impact rising sea levels may have on Public land. Private homeowners individually may be at low risk - i.e. Top of a hill etc but we know that large tracts of the roading/train network in Auckland is on flood plains (or in fact on very low lying reclaimed land). Being at the top of the hill isn't much help if you can get there. In the same way, large numbers of remote costal settlements and properties will become uninhabitable just because they won't be accessible via low lying public land.