Buying a home is a big step, but with rising sea levels, heavy rain, and flooding becoming more common across New Zealand, there’s a lot more to consider than just the location and school zones. Flooding isn’t just about wet feet. It can affect your home’s value, increase your insurance costs, and even make it harder to get a mortgage.
The good news is, if you’re well-informed, you’re in a much stronger position. Knowing the flood risks before you buy helps you make better choices about where to buy, what to pay, and how to protect your investment. Let’s take a closer look at what you need to know to keep both your home and your finances safe.
The Growing Threat of Flooding in Aotearoa
Flooding from rivers, heavy rainfall, and rising sea levels is the most significant physical climate risk to properties in New Zealand. The increasing frequency of extreme weather events has led to devastating losses across the country, particularly in recent years.
The statistics tell a sad story:
- Auckland Anniversary Weekend floods (2023) caused damage across the region with insurance claims estimated at over $1 billion, four fatalities, and thousands of homes damaged
- Cyclone Gabrielle (2023) brought widespread devastation across the North Island, particularly Hawke’s Bay, Gisborne/Tairāwhiti, and Northland, with insurance claims exceeding $2 billion
- West Coast and Marlborough flooding (2021) damaged over 400 homes in Westport alone, with approximately 100 deemed uninhabitable
According to the Insurance Council of New Zealand, the total cost of weather-related claims in 2023 was approximately $3.5 billion – the highest on record for a single year. These aren’t once-in-a-lifetime events anymore; they’re becoming our new normal.
How Flood Risk Impacts Your Property Value
The financial implications of flood risk extend well beyond repair costs after an event. Research from Motu Economic and Public Policy Research found that properties in flood-prone areas in New Zealand can sell for 4-8% less than comparable properties outside flood zones.
Research supported by the Deep South National Science Challenge suggests that properties with high exposure to climate risks could see value declines of 10-15% over coming decades. This creates a concerning scenario for homeowners:
- Immediate impact: Properties in identified flood zones are already selling at discounts
- Future concerns: As climate risks increase and awareness grows, these discounts may deepen
- Resale challenges: Properties with known flood risks often take longer to sell
A home in Lower Hutt that was valued at $950,000 before the area experienced significant flooding in 2021 later sold for just $870,000 – despite having no actual flood damage itself. The mere perception of increased risk was enough to affect its market value.
Insurance: The Canary in the Climate Coal Mine
The insurance industry is often the first to respond to changing climate risks, and in New Zealand, we’re already seeing significant shifts:
- Risk-based pricing: Tower Insurance implemented risk-based pricing for flood-prone areas in 2018, with other insurers following suit
- Affordability issues: Some homeowners in high-risk areas like coastal Hawke’s Bay or parts of the Coromandel are reporting premium increases of 30-50%
- Coverage limitations: Insurers are introducing higher excesses specifically for flood events, sometimes $10,000 or more
Insurance giant IAG (which owns State, AMI, and NZI) has identified approximately 10,000 properties in New Zealand at high risk of flooding or coastal inundation. For owners of these properties, the insurance situation is becoming increasingly precarious.
How Flood Risk Affects Your Mortgage Options
Banks and lenders are becoming increasingly cautious about properties in flood-prone areas. The Reserve Bank of New Zealand estimated in 2021 that around $104 billion worth of residential property is exposed to coastal flooding risk, creating significant concern in the financial sector.
Here’s how this affects your mortgage prospects:
- Stricter lending criteria: Major banks are developing climate risk assessment tools to screen property locations
- Higher deposits: Some lenders require larger deposits (often 30% or more) for properties in identified flood zones
- Insurance requirements: If insurance is expensive or difficult to obtain, mortgage approval becomes more challenging
- Loan term impacts: Some lenders are shortening maximum loan terms for properties in high-risk areas
Assessing Flood Risk Before You Buy
Understanding a property’s flood risk before purchase is crucial, but New Zealand’s current information systems have limitations:
- LIM (Land Information Memorandum) reports contain flood hazard information, but these vary in detail between different councils
- Council hazard maps often use historical data and may not account for climate change projections
- Flood zone classifications (such as AEP 100, meaning a 1% chance of flooding each year) are frequently misunderstood by buyers
More accurate approaches include:
- RiskScape assessments: Developed by NIWA and GNS Science to model potential impacts of natural hazards
- Climate risk reports: Specialized reports that incorporate climate change projections are becoming available
- Property-specific assessments: Professional assessments that consider the specific features of a property, not just its general location
Unlike the traditional reliance on council data, these advanced tools provide a more forward-looking perspective – crucial when you’re making a 30-year mortgage commitment.
How Mortgage Brokers Can Help Navigate Climate Risks
As mortgage brokers specialising in the New Zealand market, we’re increasingly helping clients navigate climate-related considerations:
- Lender knowledge: We understand which lenders are more flexible with properties in different risk categories
- Insurance options: We also offer property insurance (fire and general) as well as contents insurance
- Risk assessment: We can help interpret climate risk information and its potential impact on your financing options
- Long-term planning: We can structure your mortgage to accommodate potential adaptation needs
Many clients are surprised to learn that even within the same flood zone, different lenders may take very different approaches to mortgage approval. This makes a reputable mortgage broker Auckland expertise particularly valuable.
Make Climate-Smart Property Decisions
Climate risks don’t mean you should abandon your homeownership dreams. Instead, they call for informed decision-making:
- Location considerations: Areas like coastal Wellington, parts of Christchurch, and low-lying Auckland suburbs face different types and levels of risk
- Property features: Elevation, construction type, and drainage systems can significantly affect a property’s resilience
- Future adaptability: Consider whether a property can be modified to reduce risk if needed
- Investment timeframe: Your planned holding period affects how much future climate risk matters to your purchase decision
A client recently chose a property in Hamilton over one in Thames partly due to flood risk considerations, but selected a home with good elevation and resilient construction to further minimise exposure.
Need Help Navigating Climate Risks in Your Home Purchase?
Understanding how climate risk might affect your property purchase adds another layer of complexity to an already challenging process. But you don’t need to figure it all out alone.
At Oliver Broomfield Mortgage & Insurance Advisers, we help Kiwi homebuyers understand how climate risks might affect their mortgage options and long-term property investment. We will give you the best mortgage advice upfront without any obligations.
