Escalating flood risks mean UK properties could be on track to be overvalued by £20 billion, research from Hometrack reveals.
The analysis, using Hometrack’s advanced Climate Change Insights engine, reflects likely asset losses and the end of the Flood Re scheme in 2039. And depending on the levels of insurability available after the end of the scheme, the overall impact could triple to £60bn by 2050.
HIGH RISK PROPERTIES
Based on today’s flood risk, 400,000 high risk properties will be exposed to a value loss of 7.5%. And as climate change intensifies the impact of flood risk, another 150,000 properties are considered to be high risk by 2050.
The 400,000 properties with the highest risk and expected value loss, alongside 500,000 properties with medium risk, are not evenly distributed across the country. East Anglia has a higher proportion of affected properties, with 1% of total property value in East Anglia potentially impacted by flood risk.
Hedda Haugland, Hometrack
Hedda Haugland, Climate Change Product Lead at Hometrack, says: “Storms Elin and Fergus reflect the increased risk that extreme weather poses to UK properties.
“As the impact of climate change intensifies, such severe flood events are likely to become more frequent. In many areas the ongoing burden of flood protection and insurance will undermine property values, and in the most extreme cases it may impact home owners’ ability to secure insurance and a mortgage.”
The Flood Re Scheme comes to an end in 2039 and terminates an agreement between the Government and insurance companies to provide flood insurance coverage to domestic properties deemed at significant risk of flooding.
THOUSANDS AT RISK
Property values have not yet incorporated the risk posed by the ending of the scheme in 16 years, which is firmly within the average mortgage term of 25 years, leaving thousands of mortgages at risk.
Haugland adds: “It is crucial that insurers and lenders price in the potential impact of flood risk, and ensure that homeowners understand future policy implications such as the end of Flood Re in 2039.
“Additionally, the government needs to commit to further investment in flood defences and property-specific flood protection grants.”
Main picture: One of many flooded streets after the River Thames burst its banks near Windsor, UK on 11 February, 2014.
