Economists Kellie Bellrose,David Norman and Michelle Royters found by 2050,about 400,000 more loans (or 2.5 per cent of all loans) would have a loan-to-value ratio of more than 80 per cent – half of those with an LVR of more than 90 per cent – as property values fell due to climate change.
They suggested there would be 254 “climate-sensitive suburbs” at increased risk of a drop in value by that time,rising to 1438 suburbs by 2100.
In Sydney,most of the city’s northern suburbs from Mosman to the northern beaches and across to the Ku-ring-gai area stretching past Hornsby fell into this category,along with the Cronulla peninsula. Almost every coastal suburb in Brisbane was considered climate-sensitive,as was the area around Lilydale,Croydon and Kilsyth in Melbourne’s outer east and Mandurah to the south of Perth.
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In Australia,about two-thirds of major bank lending is for residential mortgages,making any change in housing values a key risk.
The Australian Prudential Regulation Authority is working with the nation’s largest banks to identify their potential vulnerability to climate change amid growing global recognition of the risks it poses to the entire financial system.
The United Nations Intergovernmental Panel on Climate Change’s (IPCC) latest report confirmed the world was on track to experience extreme weather due to global warming even if swift action was taken to limit global warming to 2 degrees. It predicted Australia,which has warmed 1.4 degrees since 1910,would experience rising average temperatures with extreme heat,more frequent and intense bushfires,droughts,floods and rising sea levels.