Housing prices could fall by 10% due to climate change

The risks involved in climate change can knock about 10 percent off of the Netherlands’ total home value, according to research by Calcasa. Approximately 1.5 million Dutch homes are at risk of earthquakes, 3.7 million homes are at risk of flooding, and almost 2 million homes are at risk from the effects of drought. If these natural disasters were included in determining house prices, it would result in a depreciation of up to 325 billion euros on the total value of approximately 3.3 trillion euros of the 8.2 million homes in the country.

Calcasa looked at what effect the repair costs in the aftermath of natural disasters would have on home values and how the fear of a possible disaster could affect home prices. According to Calcasa, a large proportion of the 485,000 thousand homes in Amsterdam, with a total value of over 255 billion euros, are affected by at least one of the climate risks. “The potential loss of value to climate risks in the capital could amount to almost 22 billion euros.”

Rotterdam homes could face value losses of over 10 billion euros on a total value of 113 billion euros, and The Hague 8.5 billion euros on 108 billion euros. Utrecht is smaller than Rotterdam and The Hague, but the city is also more sensitive to climate risks. Utrecht could lose over 11 billion euros of its homes’ total 75 billion euros value.

About 51 percent of Dutch homes are currently at risk of flooding. The total value of these homes is almost 1.7 trillion euros. Last year, the European Central Bank calculated the price shock a risk of flooding could cause. Based on these price shocks of between 4 and 45 percent, the risk of flooding could depreciate these homes by up to 179 billion euros - 5.4 percent of the current value.

Flooding caused by heavy downpours can damage basements and cause mold to form. Just over 3 million homes, with a total value of over 1.2 trillion euros, are at risk of flooding at least 10 centimeters during a heavy shower. “Various international studies show that water damage can have a negative effect of between 2.5 percent and 10 percent of house prices, bringing the potential value effect to 22 to 86 billion euros.”

Persistent drought increases the risk of wildfires - putting about 2 million Dutch homes at moderate and 28,000 homes at high risk. “The market pricing of this risk could lead to approximately 75 billion euros depreciation,” Calcasa said. Persistent drought can also lead to foundation problems like pile rot and differential settlement, which could knock 12 percent off a home’s sales price and lead to a potential loss of value of 29 billion euros.

Finally, 1.6 million homes with a total value of 600 billion euros are at risk of earthquakes, either in the Groningen gas extraction zone or in the south, where there is tectonic instability. This risk could knock between 2.5 and 10 percent of home prices if it were considered, leading to a potential value loss of between 14 and 60 billion euros.