Sea-level rise and major weather events caused by climate change are expected to increasingly threaten coastal real estate properties around the world, including in Hawaiʻi. There is, however, growing evidence that U.S. homebuyers are taking the real estate impacts of climate change more seriously, according to a new University of Hawaiʻi Economic Research Organization (UHERO) blog authored by Justin Tyndall, UHERO assistant professor and assistant professor of economics.
Tyndall used a complete data set of repeated home sales from Long Island, New York to estimate the lower price appreciation caused by the threat of sea-level rise. Between 2000 and 2017, Tyndall found properties that were between 0–2 meters from the current sea level had annual appreciation that was 1.3 percentage points less than the overall market.
Research also revealed evidence on how demand shifted within the market for coastal real estate. Tyndall discovered that homes near the coast, but at a higher elevation, performed better than the overall market, gaining 0.8 percentage points above average in annual appreciation. Tyndall said homebuyers interested in coastal real estate shifted their demand from high-risk to low-risk properties, pushing up the price of lower-risk coastal homes.
“As the consequences of climate change become more certain and less distant into the future, the impact on real estate markets will accelerate,” said Tyndall. “A significant share of properties in Hawaiʻi are exposed to sea-level rise and coastal erosion. A steady decline in the value of high-risk real estate helps to soften the risk of sudden, calamitous losses for coastal property owners. Nevertheless, the future consequences of climate change represent an enormous financial loss to real estate markets and a reorientation of how coastal property is developed and managed.”
UHERO is housed in UH Mānoa’s College of Social Sciences.
This work is an example of UH Mānoa’s goal of Excellence in Research: Advancing the Research and Creative Work Enterprise (PDF), one of four goals identified in the 2015–25 Strategic Plan (PDF), updated in December 2020.