Climate change remains a topic of serious discussion in modern society. While some people still consider climate change as a myth fabricated by environmental activists, others are convinced that it is not only real but also one of the most pressing global challenges of our time. Even among those who acknowledge the reality of climate change, opinions are divided. Some view it as a problem for future generations. In contrast, others – such as climate migrants whose lives have already been dramatically affected – believe it’s a challenge of today, with consequences that will only worsen over time.
Whether we like it or not, global warming will likely have an increasing impact on various aspects of our lives soon, and as a property investor, you need to be informed about the risks posed by climate change. It means being well-prepared and equipped with the right knowledge to make your real estate investments safer and more profitable in this changing world.
Climate change affects homeowners' utility bills
As global temperatures rise due to climate change, the occurrence of extreme heat events is becoming more frequent and intense across the world. These heatwaves place significant pressure on energy grids, drive utility costs, and have far-reaching economic consequences.
One of the most direct effects of extreme heat is the increased demand for energy to power air conditioning systems and cooling technologies. During heatwaves, people rely heavily on cooling to maintain comfortable and safe indoor temperatures. This sudden surge in energy usage can strain power grids, driving up electricity prices and sometimes leading to outages.
In the summer of 2022, Europe experienced one of its most severe heatwaves on record, with temperatures exceeding 40°C in countries like Spain, France, Italy and the UK.
This intense heat led to a significant increase in energy demand, primarily due to air conditioning usage, which is typically less common in many European homes. At the same time, the heatwave reduced the efficiency of power plants and even caused some facilities to shut down due to water shortages. The combination of high demand and limited supply drove up electricity prices in several European countries. In the UK, energy bills for households significantly increased over the summer months, with many households facing financial strain as a result of these unexpected price hikes.
Landlords who had utilities included in regular monthly rental payments faced some serious losses due to skyrocketing bills.
The risk of insurance market crisis
One of the most noticeable impacts of climate change on home insurance is the steady rise in premiums. As extreme weather events become more frequent and severe, insurers are facing higher payouts, leading them to raise prices to offset their growing risk exposure. Homeowners in high-risk areas, such as those prone to flooding, wildfires, or hurricanes, are particularly affected by these price increases.
In addition to higher premiums, many insurers are simply declining to renew or issue new policies. For example, many insurance companies have fled California and Florida due to increased claims after more frequent environmental disasters.
At first glance, it may seem that the effect of increasing premiums or refusal of insurance companies to operate in certain regions might be slight. But this is not so. The real effect is felt when somebody has to give up on purchasing or refinance their dream home since the mortgage lender refuses to proceed with the deal due to the absence of insurance.
Extreme weather events: from fires to hurricanes
The increasing frequency and severity of extreme weather events, such as hurricanes, wildfires, and floods, is another significant climate-driven risk. For example, wildfires in California and Australia have caused billions of dollars in damages to the real estate markets, leading to a spike in insurance claims and significant economic losses. In hurricane-prone regions like the Gulf Coast of the U.S. or the Caribbean, stronger storms are wreaking havoc on both residential and commercial properties.
These natural disasters can lead to short-term market disruptions as recovery efforts get underway, but the long-term impacts could lead to a reduction in property values in high-risk areas, shifts in migration patterns, and a growing preference for properties in safer, inland locations.
However, currently, it’s very hard to say that people massively abandon high-risk cities due to climate change, inversaly in the USA areas like California and Florida still remain popular.
Experts note that today Americans’ relocation decisions are driven primarily by economic factors and lifestyle choices rather than the threat of hurricanes or wildfires. Many people move in search of better job opportunities or more affordable living costs, while others want to be closer to family and friends or prefer a location with more sunshine and outdoor access.
While it’s impossible to predict the future with certainty, if the trend persists, it’s likely that safety and risk factors will increasingly influence where people choose to live.
At NOVA we seriously consider the risks of climate change, regularly monitor the trend, and ensure all our properties are properly insured. When you invest with NOVA, you can be sure that your investments are safe and secure.
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