Climate change: what impact on real estate?

Rising average temperatures in France, rising sea levels, recurrent droughts... The effects of climate change in France are already undeniable. Météo France, which has studied the effects in France, predicts a disparate evolution depending on the region: some areas are likely to be very strongly impacted, while others can hope to remain relatively unaffected by the effects of climate change. What are the consequences for the attractiveness of French regions? Will a property in a region with high heat waves lose value? Are seaside properties at risk from rising sea levels?

To answer these questions, and to find out how to prepare for these risks, a review of the impacts of climate change on real estate in France.

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1. Temperature rises: consequences for living comfort

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Rising temperatures and thermal discomfort

The rise in temperatures in France is characterised by several phenomena: the rise in average annual temperatures throughout the country (from +1.6°C to 3°C by 2050 (AFP, 2021)), the increase in the number of heatwave days, the lengthening and increase in intensity of heatwaves... All of these phenomena increase thermal discomfort within the home. Remember the scorching nights, when, after a day of intense heat, it is impossible to close your eyes because of the muggy heat in the air... Now imagine that these days occur two or three times more often per year. It's unenviable, isn't it?

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Which regions are most affected?

During the last heatwave in 2019, it was Occitania and Provence-Alpes Côte d'Azur that experienced the highest temperatures, while Brittany and Hauts-de-France were favoured by summer tourists that year (L'Express, 2019). These phenomena will continue to affect France very unevenly, and the AFP has created a simulator where you can find out the effects of weather changes in your commune, available here: Tomorrow, what climate on my doorstep?

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Impacts on real estate and tourism

Although the property market has not yet shown any change directly linked to these phenomena, it can be seen that over the period 2015-2019, the increase in tourist numbers was almost twice as high in the cooler departments (Seine Maritime, Manche: +9.6% on average) than in the departments most affected by heat waves (Hérault, Gard: +4.5% on average) (INSEE, 2022). The two heatwave episodes of 2017 and 2019 could explain this preference, with in particular the peak temperatures in 2019 which peaked at 46°C in Hérault.

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Cities, the front lines of global warming

Cities will be particularly affected, as they form heat islands that amplify heat wave phenomena and make it difficult for temperatures to fall (due to the lack of greenery, the profusion of concrete areas, etc.). In Paris, we could have three times as many hot nights in 2050 as we are used to, i.e. 20 nights per year (AFP, 2021). In Marseille, we could have six times as many extremely hot days; and in Brest, twice as many abnormally hot days.

Mapping of temperature trends :

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2. Increased risk of drought and weakening of buildings

In January 2022, Covéa, the leading French insurer (owner of the MAAF, GMA and GMF brands) revealed in its white paper on climate change that there will be an inevitable increase in risks to buildings due to droughts caused by climate change in France. Indeed, Covéa reports that there has already been a marked increase in drought-related claims, which is expected to continue to rise by more than 60% by 2050 in France. What are the links between drought and the weakening of buildings?

The risk of drought, which for the built environment takes the form of the insurance risk of "shrinkage-swelling of clays", is a phenomenon that weakens the soil on which buildings are built when this soil experiences episodes of drought. This phenomenon, linked to variations in the volume of the soil, leads to differential settling causing damage to buildings. Since 2016, the recurrence of intense drought episodes and the damage caused have increased. Between 1989 and 2020, the costs related to the effects of drought amounted to almost 15.2 billion euros.

The analysis made by Covéa (see map below) suggests that the Massif Central could experience an intense aggravation of drought damage.

Risk mapping:

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3. Rising sea levels, a threat to the French coast

Another effect of climate change is the rise in water levels, which threatens all areas along the coast. What about France, with its 5,500 km of coastline? Is rising sea levels a cause for concern? Can it pose a risk to real estate?

According to Callendar's analysis, exposure to the risk of coastal erosion due to rising sea levels is largely underestimated. Indeed, 15,000 real estate transactions concluded between 2016 and 2021 involved properties that would become flood-prone before 2050. The total value of these properties at the time of purchase was estimated at €5 billion, a value that did not take into account exposure to the risk.

This global rise is already real: since the beginning of the 20th century, a rise of 20 centimetres has been observed, which is faster than anything observed in the last 3,000 years. Callendar points out that the mouth of the Seine and the Atlantic coast are the most exposed, with cities such as Le Havre, for which the value of property at risk by 2050 would be more than 1,000 million euros, and Bordeaux, Deauville and Caen.

Another important point of the study is that while these risks are already present by 2050, they will increase by the end of the century. According to the different scenarios analysed, i.e. depending on the speed at which the Antarctic ice melts and the quantity of greenhouse gases emitted during the century, the number of properties at risk could be multiplied by 10 by 2100.

The firm also offers a simulation tool to find out if a property is located in a flood risk zone, which you can find here: http: //submersion.climint.com/

Mapping the risks of rising water:

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4. Loss of property value due to climatic risks

Is your home at high risk from climate change? Is your property likely to lose value by 2050? Knowing that first-time homeowners (owners who still have loans to repay for the purchase of their main residence) live in their homes for an average of 27 years (INSEE, 2017), the transactions that are made today are already affected by the changes to come by 2050... i.e. in 28 years.

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The evolution of the attractiveness of properties

There are a number of factors to be taken into account when assessing the potential loss of value. Callendar's analysis of transactions over the past 5 years suggests that climate risk is currently largely underestimated in the property market. Some property investors or developers are proposing to upgrade their buildings to avoid "climate obsolescence", i.e. adapting buildings to protect against the effects of climate change. This resilience could then take the form of improved temperature and humidity management indoors, or additional protection of pipes against flood damage... But it does not protect against the other inconveniences of a city affected by these extreme phenomena: is it always pleasant to live in a city that experiences more than 10 days a year above 35 degrees, like Toulouse? Where the number of hot nights reaches 19 per year, like Grenoble? Today, no study shows that property prices are changing in this direction, but their attractiveness could change by the middle of the century.

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The risk of uninsurability of goods

Alongside the risk to attractiveness is the problem of the insurability of property. In fact, in areas that are increasingly exposed to risks, with significant material and financial damage, insurers could decide to no longer cover certain claims, or the prices would become so high that they could be prohibitive for owners. Already, in some overseas regions, several insurers have withdrawn because the risks are considered too high, and even where insurance is still available, the segmentation of rates is such that insurance becomes economically unaffordable (L'Argus de l'Assurance, 2019).

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Access to information on these risks

The main consequence that will affect property owners from next year onwards, with the entry into force of a new law on information on coastal erosion risks. In France, from 2023 onwards, tenants and purchasers will have to be informed of the risks of coastal erosion within a century as soon as the advertisement is published. In addition, owners will have to make provision for the costs of destruction and restoration.

This law, which is part of the Climate and Resilience Act, aims to ensure that buyers and tenants are aware of the risks to which the property they are interested in will be exposed, in the light of anticipated developments due to climate change. There is therefore a real risk for all properties that have been acquired recently, in ignorance of the risks to which they are exposed, and which could then lose value on the real estate market once these risks are known.

According to Callendar, in the 78 communes in France where properties that will become at risk before 2050 account for more than 5% of transactions, the local property market is likely to be greatly impacted by the communication of this new information.

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Conclusion

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Is your property at risk of losing value?

It all depends on its exposure to the specific risks associated with climate change, including rising sea levels, rising temperatures and increased drought. Different geographical areas will be impacted differently by the different effects of climate change: the north-western and western coasts of France will be at the forefront of sea level rise, while the south, east and major cities will be more exposed to temperature increases.

You can consult the tools developed by Callendar andAgence France Presse to estimate the risk according to your geographical position.

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When might the property lose value?

In the case of rising water levels, the Climate Act may well reveal as early as 2023 that some properties are overvalued in relation to their exposure to risk. In the case of rising temperatures and drought, there are no studies to date that indicate a potential risk of loss of value, although there are weak signals that recurrent heatwaves are increasing the attractiveness of regions that are spared from high temperatures.

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Annex: The dictionary of climatic phenomena

Abnormally hot days: when the daytime temperature is 5°C or more above normal.
heat wave: when more than five consecutive days are abnormally hot.
extremely hot days: when the temperature is above 35°C
heatwave: a heatwave is a phenomenon of great heat, but its definition is not universal. Indeed, each region has its own characteristics to define a heat wave. For example, for metropolitan France: Paris heatwave if at least 31 °C during the day and 21 °C at night; Marseille heatwave if at least 36 °C during the day and 24 °C at night.
hot night: a night when the temperature does not fall below 20°C, preventing the human body from resting properly.
heat islands: a phenomenon of localised temperature increase in urban areas compared to neighbouring rural areas. These heat islands are artificial microclimates caused by human activities (power plants, heat exchangers, etc.) and urban planning (dark surfaces that absorb heat, such as tar).
shrinkage-swelling of clays (RGA): a phenomenon linked to variations in soil volume, which leads to differential settlements causing damage to buildings
coastal erosion: thegradual loss of material that causes the coast to retreat and the beaches to recede.
flooding: temporary inundation of the coastal zone by the sea which occurs in an extreme manner under the effect of severe meteorological (wind, depression) and oceanographic (strong swell, tide) conditions.

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