Global climate change may affect Florida’s real estate market

Global climate change may affect Florida’s real estate market

The climate continues to change, which affects the international real estate market in all respects, from price growth to reduced popularity of certain regions. The examples are numerous, from torrential rains that caused mass floods and landslides in the Netherlands, Australia, and Florida to ravaging forest fires and draughts in Greece and California. The temperature in some parts of Europe has also reached a historical high of 48.8°C. Climate-related risks are often underestimated or misunderstood, especially by players in the real estate market.

Climate change will increase the frequency of extreme weather events that may pose a considerable risk for properties in the nearest future. For instance, longer periods of summer heat entail greater use of air conditioning and higher utility bills. Another climate risk is draught that can limit water consumption in buildings and increase the incidence of forest fires.

The weather and climate change in many regions made housing vulnerable and reduced the number of jobs. The long-term situation in the economy also forces lower-income residents to move to old districts subject to floods. This, in turn, may cause a catastrophe.

Affordable housing is becoming a problem for many states, particularly for Florida, where the population is growing, as are the prices and the rent. For instance, the real estate market in Sarasota-Manatee will most probably face the problem when a greater number of residents will need to repair their properties. The demand for construction services will surge, which will draw more contractors there and increase the duration of renovations.

After the recent hurricane that damaged many houses in Florida, sellers of all properties need to bring their homes to a proper condition. Regardless of how slow the real estate market might be, the sales are growing, so this will not have a negative impact in the long term. The rampant inflation of homeowner and flood insurance can have more long-term effects for Florida’s west coast than the natural disaster. It means that the market should expect a lower supply and a higher demand.

The ripple effect of climate change in Florida will be greater than on average across the globe, as the sea level will rise significantly higher because of winds and ocean currents. The average altitude in Florida is 1.8 meters, so the rising sea level has increased the number of properties subject to the risk of flooding.

Although Hurricane Ian destroyed and damaged many houses a few months ago, Florida’s real estate market remains profitable. Numerous studies have shown that the value of properties in locations affected by the hurricane was historically higher than the nationwide average after a natural disaster. It will remain at this level in the nearest future because of the huge demand and low supply. Data from the Florida Atlantic University shows that buyers are ready to pay a surcharge of 70% on average.

Real estate investors should take the climate change risk into account when they make purchasing decisions, especially from the financial perspective. They need to consider long-term and short-term financial effects, such as higher insurance costs, higher operating expenses, and the district’s outlook over the next 25 years. These efforts will ensure accurate and consistent asset evaluation.

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