How will climate change impact home buyers?
- Credit: Archant
Software developed by Essex firm is helping the property sector analyse the risks posed by climate change.
An East Anglian property insurance expert believes climate change will bring about major changes in the way banks provide finance to home buyers.
In the future, lenders are likely to introduce schemes to make it easier for homeowners to release equity from their properties to pay for adaptions against flooding or subsidence, and the installation of carbon reducing technologies, such as solar panels, says Michael Lawson, who is chief executive at Property Risk Inspection, a business based in Colchester that specialises in property insurance claim assessments.
Since 2018, the company has been involved in a pioneering project with Airbus to develop software that models the impact climate change might have on the country's housing stock.
The technology takes details from Airbus' satellites and combines it with flooding and climate data to show how various temperature rise scenarios might affect properties both in terms of subsidence because the ground has dried due to lack of rain, and flooding through an increase in rainfall and extreme weather events. Crucially, the software allows users to see this impact at address level and to identify how resilient individual properties are to climate change.
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The tool has been developed for Nationwide Building Society to provide it with strategic information about how at risk the properties are where it has provided the mortgage.
Mr Lawson says this work comes in the wake of the Bank of England urging financial institutions to better understand their exposure to the threats posed by climate change. He says until now this level of information has not been available to insurers, developers, banks and lenders looking to plan ahead, and will also ensure any future new builds are fit to withstand the perils of the changing climate.
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"Insurers currently look at past claims as an indicator of future risk, however, past claims have now become a poor predictor, due to the major influences on soil, subsidence and flooding of climate change," he said.
"With big data and the modernised geospatial system, we have developed, with our partners at Airbus, a means of understanding flood and subsidence risk on a house by house basis, not just by post code."
With this information to hand Mr Lawson believes property surveys of the future will become more personalised, providing potential house buyers with information about how likely their property will flood or subside into the future, and lenders with details relating to climate change on which they can base their decision to provide a mortgage or not.
He envisions a future where local authorities might issue a certificate denoting a property's climate change resilience in much the same way that energy performance certificates (EPCs) summarise the energy efficiency of buildings.
"Imagine a future survey that says if you add photo voltaic panels and Tesla battery storage to your home, you will improve your rates score and your rates charge will be in a lower band," continued Mr Lawson.
"That's because you are not adding any carbon and you are making your property more sustainable. You are giving energy back to the grid, you are not using at peak times."
"We are already seeing how EPC scores are changing behaviours. The Government is saying that you can't rent out a property if you are in the F or G band. The Government is already influencing people by saying 'you can't benefit from the rental of this property if you are going to rent it to people when the energy costs are high'."
Mr Lawson also believes we will see innovation in the funding products provided by banks that will take into account other societal trends alongside climate change, such as the ageing population and social care crisis. Just as we might need to adapt our homes as we get older, so we might do as the consequences of a changing climate start to show," he says.
These adaptions could be paid for by releasing equity from a property.
"At the moment our homes are pretty illiquid. We live in a home but it doesn't really help us much," said Mr Lawson.
"Now and again we might re-mortgage or apply for a kitchen extension but if we regarded our home as more liquid we could adapt more.
"Local authorities are taking an average of £36,000 off any person who needs annual care. You could end up burning through your property value quickly but that money could be better spent making adaptions that allow people to stay in their homes.
He added: "It hasn't been our culture to say that our home is a defence, our home is an asset.
"I think in the future our banks will be saying let us help you with your climate change resilience. The nature of their funding lines are going to change. We are in a world where everything is changing: climate change, society, millennials, pensions, an elderly population.
"How do we keep people in their homes, how do we treat them humanely and fairly?
"Part of that is about people starting to think of their home differently."