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February 15, 2024

The Climate Change for Homebuyers

Philip Syvret

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As Jersey continues the clearing from all the damage that Storm Ciaran caused, Philip Syvret considers the impact of climate change for homebuyers, which may be more than just the risk of further storm damage.

I’ll wager that the effects of climate change are not at the top of the list of concerns for many looking to purchase a home in Jersey. Increasing intensity of climate events around the world are, however, a reminder of the potential difficulties to be faced in years to come.

What is presently a peripheral concern to homebuyers is, however, a matter on which our Government is heavily focussed. We are all now signed up to a carbon neutral strategy with a view to the whole Island being carbon neutral in a little over 25 years. 

To get to that position there will have to be some serious adjustments in all aspects of our lives. The way we own and occupy our homes will be part of that. Everyone involved in buying or selling property will have to adjust their viewpoints accordingly.

As a property lawyer, I need to advise my clients in all aspects of a commercial or residential purchase. I consider title deeds, regulations imposed by government and physical aspects of the property. Increasingly, alongside selling agents, surveyors and lending banks, I have to consider the wider impact of global change. 

It’s an area which all involved in real estate work are focused on. At the recent PWC Channel Islands Real Estate Conference nearly half of 150 industry professions indicated in their response to a survey that ESG (Environmental, Social and Governance) issues were the area that would have the biggest impact on the real estate industry in the medium (3 to 5 year) term.

An example of the carbon neutral strategy is the imposition of energy performance certificates (EPCs). That certificate tells you how energy efficient a building is. These certificates have been used in the UK for some years but will be new to Jersey. Legislation is awaited but it may well be that by 2025 you will not be able to sell a house unless you provide the buyer with an EPC. In the future it may not even be possible to sell or rent property at all unless the EPC shows that the Property is above a minimum standard.

It’s not just regulatory impact that we need to consider. Climate change brings a risk of weather extremes. In Jersey, that can mean violent storms, headland gorse fires or rising sea levels. We have seen in recent months the risk that storms can have for coastal properties. Flooding in Grands Vaux and other areas have hit the headlines in the last year. Sea wall enhancements at Beaumont and other areas have had to be implemented. Those physical risks need to be considered by any buyer.

An increased risk of physical damage leads to the secondary risk of an inability to insure. The wildfires in Australia seem a distant threat to these shores, but as a consequence of climate change, insurance costs in New South Wales have sky rocketed and some 11% of properties are uninsured because of those driven rates. 

If it becomes impossible or unaffordable to insure a property which lies on the coast next to a rising sea or in a valley at risk of flooding, the property will also become unmortgageable. 

The ability of a buyer to secure a mortgage on a property of course underwrites its value. High street lending institutions are looking very carefully at the impact of climate change on the real estate market. They are, after all, making loans on a daily basis which will last for 30 to 40 years, underwritten by expectations of the sustained value of the property that they are funding. 

In a lending market that is already constrained by strict financial stress testing, I have little doubt that increasingly we are going to see lenders taking a view on climate change impacts. The impacts that they will consider will be wide-ranging. Is the Property at risk of physical damage if storm, flood or fire risks increase in decades to come? Will the Property become uninsurable as a consequence? Will the owner be able to afford to insure? If EPCs or other directives are issued by government for energy efficiency, will the owner be able to afford to meet the costs of retro-fitting to meet requirements? 

If these are factors that the bank will consider and then they are factors which any buyer will necessarily need to consider also.

As I drive past the tree surgeons clearing the roads and the roofing contractors patching the tiles after Storm Ciaran, I am particularly conscious therefore that we are in a period of significant change. Whilst we must all do what we can to contribute to the carbon neutral policy, any property investment now will need to take a long term view as to how the climate and consequential regulatory framework might change over the years. 

Philip Syvret is one of the Island’s most experienced Property lawyers. He advises on all types of residential and commercial purchases, as well as private and commercial lenders.
He can be contacted via philip.syvret@benestsyvret.com or on 706670.

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