A case study from the McKinsey Global Institute contemplates that question, noting that global warming and related phenomena likely would wreak havoc on insurers, property owners, and ultimately, global supply chains.
“A climate-related devaluation of property prices in Florida would cascade throughout the state economy, affecting government tax revenue, GDP, commercial development, and population growth,” the April 2020 report contends.
Florida, one of nine ” leading-edge examples of climate change risk” the study spotlights, faces challenges from both natural phenomena (increasingly volatile storms) and unnatural phenomena (the propensity of people to build in flood-prone areas without regard to exposure to said storms).
“Florida, with its low-lying terrain, large coastline and share of population exposed to climate change effects, as well as its economic dependence on real estate, may be particularly at risk,” McKinsey asserts.
Two-thirds of the state’s people live near the coastline.
Average annual losses, $2 billion per year now, are forecast to increase to $4.5 billion by 2050.
However, the real black swan scenario is the “100 year flood” type event that appears to be becoming more regular than once a century.
“Damages from such extreme events are expected to be $35 billion today and could grow by 40 to 110% to $50 billion to $75 billion by 2050.”
More than one in four people live in a 100-year flood zone, McKinsey asserts.
The report outlines a scenario in which property values plummet.
“Based on historical experience, we conservatively estimate a total devaluation of about $10 billion to $30 billion of affected homes by 2030, rising to $30 billion to $80 billion by 2050, or about the equivalent of a 5 to 15% impact in 2030 and 15 to 35% in 2050, all else being equal.
“The devaluation could be larger, and potentially result in an absolute decline in the value of homes relative to their prices today, for example, if flooding regularly affects public infrastructure or if home owners more aggressively factor climate risk into their buying decisions,” the report contends.
Tidal flooding, expected to happen 200 times a day by 2050, is expected to wreak havoc also, potentially spawning $80 billion in devaluation by 2050.
This article first appeared at Florida Politics.
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This article appears in Apr 23-29, 2020.