More homebuyers cautious of investing in coastal properties, report says
The effect of climate change and severe weather on coastal properties is one of the top 10 issues affecting real estate this year, according to a report released by The Counselors of Real Estate, a trade organization for real estate advisors.
Weather has become a formidable factor in the real estate world, says Scott Muldavin, chair of The Counselors of Real Estate’s external affairs committee.
“This issue really started as a climate change issue and rising water levels, then [Hurricane] Katrina and the tsunami happened,” Muldavin says. “It became a big issue because of [Superstorm] Sandy, which not only affected homes, local and small businesses, but flooded office buildings and transportation facilities.”
About 44 percent of the world’s population lives in coastal areas, according to the UN Atlas. In the U.S., a huge number of people live along the East Coast, the West Coast, Gulf Coast and the Florida Peninsula.
“In Louisiana, our wetlands have served as a buffer for many years,” says Albert Pappalardo, president Pappalardo Consultants, Inc. in New Orleans. “But with storm surges, our buffer has diminished, and we flood more easily.”
Because of considerable damage from storms and flooding, many are anxious about buying waterfront properties or homes in areas prone to flooding. In fact, some coastal areas have become more dangerous and less desirable in the aftermath of Superstorm Sandy in 2012.
Yet, there are still buyers who want to experience and own beachfront living.
“They realize that there’s no place you can live where Mother Nature won’t affect your lifestyle,” says Dorcas Helfant-Browning, former president of National Association of Realtors and partner at Coldwell Banker Professional Realtors in Virginia.
For some people, the pros of living near an ocean outweigh the cons of possible storm damage. In that case, here’s what to keep in mind when buying in coastal or flood-prone areas:
• Find good insurance coverage: The biggest task is to find appropriate insurance coverage, says Malcolm Young, CEO of Louisiana Realtors.
“Check on the rates being offered,” he says. “Sometimes insurance rates could affect the ability to buy the home you want.”
• Building code requirements: Before buying a property, make sure it meets all the building codes established by the state or local governments.
• New types of buildings: In flood-prone areas, builders should build homes that are elevated so that a storm surge wouldn’t have much of an impact, Pappalardo says.
• Building materials: Property should be built with weather-appropriate materials that can help withstand high-velocity winds and water damage. The building should have breakaway panels that are easily replaceable, Pappalardo says. These precautions will cost more in the short term, but in the long run this would save homeowners a lot of money on insurance.
• Protecting utilities: Electric and other utility services should be located above the first floor to minimize problems with wiring and power outages.
• Do your homework on local government and real estate: Always visit the area and find out how active and efficient the local government is regarding disaster management and prevention, says Allan Dechert , broker at Ferguson Dechert Real Estate in Avalon, N.J. Also, check if the property you want to buy has had previous flood-related damage; in that case, you may want to look elsewhere.
• Option to lease: If you are uncomfortable with making the big leap to homeownership, you can always rent or lease rather than invest in beachfront properties. “That definitely takes away your equity risks,” Muldavin says.
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