Aussie Property Climate Risk: £611 Billion Property Value Drop Expected by 2030

Aussie property climate risk threatens to leave one million homes effectively uninsurable by 2050. This alarming prediction comes from the Australian Government’s first-ever National Climate Risk Assessment, which paints a concerning picture for property owners across the country.

According to the assessment, property value losses could reach a staggering $611 billion by 2050 under a 3°C warming scenario. Currently, about 751,000 residential buildings (8.2%) are located in high-risk areas for floods, bushfires, tropical cyclones and heatwaves. Furthermore, the financial impact extends beyond Australian property values, with the report warning of $211 billion in lost wealth from reduced labour productivity.

The climate risk to Australian property is already evident.Notably, insured losses from “insurance catastrophes” increased from 0.2% of GDP in 1995–2000 to 0.7% in 2020–2024. Additionally, more than 1.5 million Australians will face the impacts of rising sea levels by mid-century, alongside escalating risks of bushfires, floods and extreme storms.

This article examines the projected economic impact of climate risk to Australian property values, the breakdown of insurance systems, broader economic consequences, and government responses to this growing crisis.

Related Article: Australia Immigration Housing Crisis: How Population Growth Is Reshaping the Property Market

Projected Economic Impact of Climate Risk on Property

£611 Billion Property Value Drop by 2030 Explained

The economic toll of climate change on Australian property is expected to be severe, with models predicting a staggering AUD 873.05 billion (£611 billion) drop in property values by 2030. This decline represents an accounting of anticipated economic contraction rather than just physical damage to properties. Notably, this projected loss excludes the cost of repairs, rebuilding homes after disasters, or replacing public infrastructure such as roads and bridges.

3°C Warming Scenario and Market Devaluation Modelling

Under a 3°C warming scenario, property value losses could escalate to AUD 934.21 billion by 2050 and AUD 1177.32 billion by 2100. This devaluation occurs as climate risks become clearer to buyers, banks value homes lower, and insurance becomes more expensive or more complicated to obtain. For instance, a house worth AUD 1.22 million might sell for only AUD 1.10 million once flood risk and higher premiums are factored in, creating a value loss of approximately AUD 122,000.

Currently, about 751,000 (8.2%) residential buildings are located in high-risk areas for extreme weather events, while 794,000 (8.7%) are in very high-risk areas. Even under a conservative 2°C warming scenario, these numbers are expected to increase to 789,000 (8.9%) in high-risk areas and more than one million (11.1%) in very high-risk zones.

Losses Beyond Repair Costs: Market Confidence and Lending

The impact extends beyond physical damage, affecting market confidence and lending practices. As economist Emma Aisbett noted, “What’s really driving in these models that loss in property value is actually the contraction of the economy. It’s the fact that industries are dying, that people can’t afford the houses”. Moreover, property losses from disasters and rising sea levels come on top of these modelled effects.

The total cost to the economy from disasters is projected to double to at least AUD 111.62 billion by 2060, equivalent to 4% of Australia’s GDP. This represents what economists would consider “an absolutely massive recession”. The impacts will be unevenly distributed, with some industries and livelihoods ceasing to exist altogether.

Insurance System Breakdown and Housing Market Consequences

Rising Premiums in Flood and Bushfire Zones

Insurance premiums have become a growing burden for Australian homeowners, especially in climate-vulnerable regions. Indeed, insurance costs soared by 16.4% over the past 12 months, becoming one of the most significant contributors to inflation. Specifically, homeowners in high-risk areas of Sydney now face premiums more than three times higher than those in safer regions, with average premiums across greater Sydney jumping by 66% since 2020.

The Insurance Council of Australia estimates that insured losses from catastrophic events have risen by nearly 50% in the past five years. Consequently, the total cost of extreme weather is projected to increase from AUD 6.12 billion per year to AUD 13.30 billion by 2050.

Uninsurable Homes and Mortgage Ineligibility

Currently, about 652,424 properties (4.4% or one in 23) across Australia are at high risk from climate hazards, with insurance often already unaffordable or unavailable. This number is expected to grow to one in 10 properties by 2035.

When insurance becomes unavailable, property values crash as homes become harder to sell. As climate risk analyst Karl Mallon explained, “That means that someone who’s got a property in a high-risk zone is going to be unable to sell that property… So you’re going to have what they call mortgage prisoners”.

15% of Households Paying >4 Weeks’ Income in Premiums

The proportion of ‘affordability-stressed’ households—those facing insurance premiums exceeding four weeks of gross household income—rose to 15% or 1.61 million households in the year to March 2024, up from 12% in 2023 and 10% in 2022. These stressed households spend an average of 9.6 weeks of their gross income on home insurance—seven times more than non-stressed households.

The situation is particularly dire in regional areas across Western Australia, the Northern Territory, southwestern Queensland and the Northern Rivers region of NSW.

Impact on Construction and Investment Projects

The construction sector faces mounting challenges due to climate risks. Since insurance is essential for financing new developments, projects in high-risk areas may become unbuildable. As Emma Aisbett noted, “If projects can’t be insured, they essentially can’t be built, because no-one can take that sort of risk on… People don’t always appreciate how crucial insurance is to actually getting investment happening”.

Simultaneously, some insurance companies have begun refusing coverage for flood, long-term sea level rises, and other climate-related events in extremely vulnerable regions, creating a cascading effect on property development and investment.

Related Article: The Housing Crisis Explained: Hidden Causes Most Experts Won’t Tell You

Systemic Risks to the Broader Economy

Labour Productivity Losses from Heatwaves

Beyond direct property impacts, Australia faces substantial economic consequences from climate-driven labour productivity declines. Under current projections, reduced labour productivity could cost Australia AUD 29.05 billion by 2030 and AUD 322.62 billion by 2050. In New South Wales alone, heatwaves are expected to cause losses of up to 2.7 million working days per year by 2061. Notably, the construction sector—employing 225,000 people or 8.3% of Victoria’s workforce—stands to lose AUD 157.49 million from a single extreme heatwave event.

Tourism Revenue Decline from Natural Disasters

The tourism industry faces equally concerning prospects. Recent research published in Economics of Disasters and Climate Change revealed the 2019-2020 Black Summer bushfires cost Australia AUD 4.28 billion in total output and eliminated nearly 7,300 jobs nationwide. Under 3°C warming, annual tourist numbers could decline by 14% as natural disasters force cancellations. Currently, half of Australia’s tourism assets are at significant risk from natural disasters.

Federal Budget Pressure from Disaster Relief

Disaster recovery places enormous strain on government finances. Although the Commonwealth spends approximately AUD 2.45 billion annually on disaster recovery, it budgets merely AUD 328.73 million—creating a AUD 9.17 billion gap over forward estimates. The 2024-25 budget alone includes an AUD 1.83 billion provision for disaster recovery payments following Ex-Tropical Cyclone Alfred.

Erosion of Tax Base and Economic Contraction

Finally, climate events erode the tax base through widespread economic damage. The cost of extreme climate events topped AUD 45.87 billion annually in 2021. Ultimately, these climate-driven losses mean higher insurance bills, less profitable companies, and fewer resources for productive investments, creating a downward economic spiral throughout numerous sectors.

Government Response and Adaptation Planning

National Climate Risk Assessment and Adaptation Plan

In response to Aussie property climate risk, the Australian Government has developed its first National Climate Risk Assessment alongside a National Adaptation Plan. This framework identifies 11 priority risks across seven key systems, including infrastructure, communities, and the economy. The plan establishes principles for targeted, evidence-based, and collaborative action to address nationally significant climate threats.

£3.6 Billion Allocated Since 2022 for Resilience

Since 2022, the Government has committed approximately AUD 5.50 billion (£3.6 billion) to policies supporting climate adaptation. This includes the AUD 1.53 billion Disaster Ready Fund for infrastructure and emergency management projects. Nevertheless, despite this investment, 90% of federal funding still goes towards recovery rather than prevention.

Four Key Gaps: Mapping, Modelling, Monitoring, Testbeds

The National Adaptation Plan acknowledges critical gaps in Australia’s climate preparedness. Unlike countries with established climate laws containing built-in progress measures, Australia requires further development in mapping vulnerable areas, improving climate modelling, establishing monitoring systems, and creating testbeds for adaptation solutions.

2035 Emissions Target and International Commitments

The Climate Change Authority has proposed emissions reduction targets of 65-75% by 2035. At present, Australia’s emissions are approximately 28% below 2005 levels, making even the lower end of this range highly ambitious. Limiting global warming to 2°C could save Australia up to AUD 236.99 billion in GDP compared with a 3°C scenario.

Conclusion – Aussie Property Climate Risk

Australia stands at a critical crossroads as climate change threatens to reshape its property landscape. The projected £611 billion property value drop by 2030 represents far more than simple accounting figures – rather, it signals fundamental economic restructuring affecting millions of homeowners and businesses. Most concerning, approximately one million homes face the prospect of becoming effectively uninsurable within a generation.

Furthermore, the breakdown of the insurance system creates ripple effects throughout the housing market. When 15% of households already spend more than four weeks ‘ worth of income on premiums, the financial strain becomes untenable for many families. This burden falls unevenly across regions, with rural and coastal communities bearing disproportionate risks.

Beyond property values, climate risks undermine the broader economy through reduced labour productivity, tourism decline, and increased disaster recovery costs. The Government’s £3.6 billion allocation since 2022 marks a starting point, albeit an insufficient one, considering 90% of disaster funding still addresses the aftermath rather than prevention.

The National Climate Risk Assessment establishes a framework for action, though significant gaps remain in mapping, modelling, monitoring, and testing adaptation solutions. Undoubtedly, Australia’s proposed 65-75% emissions reduction target by 2035 presents a challenging yet necessary path forward.

Climate risk to Australian property, therefore, necessitate comprehensive action across multiple fronts – from insurance reform and resilient infrastructure to ambitious emissions reductions. Without such coordinated efforts, millions of homeowners face not just property devaluation but potentially catastrophic financial outcomes. The choices made today will determine whether Australia can effectively navigate this unprecedented challenge or suffer increasingly severe economic and social consequences in the decades ahead.