Flood-prone homes see larger than average growth in value

At a time when homeowners are grappling with increasingly frequent and severe weather events, new data from Cotality has turned up a surprising result. 

Properties in areas judged to be most at-risk saw a 26.1% increase in value since January 2020, compared to just 19.8% for those completely unexposed. 

Speaking to rova, Cotality NZ’s Head of Research Nick Goodall says buyers appear to be putting affordability ahead of other concerns.

“Properties that are at risk of flooding typically sell at a relatively lower price. But when we look at price change over time, we have noted that those properties tend to increase at a faster rate, or certainly hold their price better over time.” 

The results can be seen in Auckland suburbs such as Mt Albert, where people can secure an upfront discount of up to $100,000 for buying in a particularly flood-susceptible pocket. 

Across the city, the cumulative growth in house values for impacted zones have reached 18.4% since 2020, with nearby comparable buffer zones seeing an increase of only 13.0%. 

Over in Hawkes Bay, a similar disparity was seen in the aftermath of Cyclone Gabrielle, which caused record-breaking floods in the region.

Before you race to buy a home in a low-lying coastal area however, Goodall says there are some things to be aware of.

“Some people might be buying these unaware of the potential flood risk, and there's some work going on to improve that awareness with the government’s National Flood Model.”

“There’s also the question of if people are getting insured correctly and completely, so that if there is another event, they will be covered by their private insurance.”

“People need to understand the insurance cost upfront as early as possible, getting a quote before you purchase a property, and certainly trying to understand the potential risk from flooding before you make that purchase.”

And Cotality NZ Chief Data Officer Craig Dargusch says while buyers face undeniable climate risk, immediate financial pressures are dictating purchase decisions.

"Our data shows that flood-affected properties trade at an initial discount, but the market is buying them anyway and growing their value faster than the rest”..

"Affordability wins today, but risk shapes tomorrow.”

“Buyers are actively accepting known flood exposure in exchange for a lower price point, which inadvertently accelerates the rate of value growth in these vulnerable zones."