One in Ten Homes Could Be Uninsurable by 2035: What Property Investors Need to Know

When you think about property investment, risks like interest rates or market downturns might come to mind.

But here's a sobering reality: by 2035, 1 in 10 Australian homes could become uninsurable.

Yes, uninsurable.

This isn’t just a "might happen" scenario—it’s a growing concern driven by climate change, with potential implications for property investors that are too big to ignore.

What’s driving the risk?

According to the Australian Climate Council, rising climate risks—particularly extreme weather events like bushfires, floods, and cyclones—are pushing many properties into the "too risky to insure" category.

Areas previously considered safe are becoming more prone to natural disasters, leaving insurers either hiking premiums to unaffordable levels or outright declining coverage.

Here are some alarming stats from recent reports:

• Over 500,000 properties in Australia could be deemed uninsurable by 2030.
• The hardest-hit regions include coastal areas vulnerable to rising sea levels and inland areas prone to flooding.

What does "uninsurable" really mean?

Uninsurable doesn’t just mean you can’t get coverage—it also means potential buyers might hesitate to invest in the property, banks may refuse to lend for it, and tenants may shy away from living in a high-risk area.

Essentially, it puts a significant dent in the desirability and value of the property.

Insurance is a critical safeguard for property investors.

Without it, a single catastrophic event could result in repair costs that outweigh your investment returns.

So, what does all this mean if you’re a property investor?

Let’s break it down:

1. Property values will be impacted

High-risk areas are likely to see a decline in property values as buyers and investors factor in the rising costs of insurance or the lack of coverage altogether.

Coastal or flood-prone properties, for example, may no longer command the premium prices they once did.

2. Rental demand could drop

Tenants may avoid high-risk areas, especially if climate-related disasters become frequent.

If a tenant fears they’ll be displaced by a flood or fire, it could be harder to maintain steady rental income.

3. Insurance premiums will surge

Even properties that remain insurable may see premiums rise dramatically.

This will eat into your cash flow and may even make some investments unviable.

4. Stricter lending criteria

Banks are already cautious about lending for properties in high-risk zones.

As insurance becomes harder to obtain, expect lending criteria to tighten, further reducing the pool of potential buyers for these properties.

What can investors do?

Here are a few steps to protect your portfolio:

1. Assess climate risks before buying

If you’re considering a new investment, research the area thoroughly.

Look at flood maps, bushfire zones, and climate change projections.

A seemingly attractive property could have hidden risks.

2. Diversify your portfolio

Spreading your investments across different regions can reduce your exposure to climate-related risks.

Avoid putting all your eggs in one basket, especially if that basket is sitting in a floodplain.

3. Factor insurance costs into your calculations

As premiums rise, they’ll impact your cash flow.

Build this into your investment calculations upfront to avoid surprises down the track.

4. Consider climate-resilient upgrades

Retrofitting properties with features like fire-resistant materials or flood-proof designs could help mitigate risks and make your property more insurable.

The silver lining for savvy investors

Here’s the thing: with every challenge comes opportunity.

Properties in well-located, climate-resilient areas may see increased demand as buyers and tenants shift away from more high-risk zones.

Final thoughts

The potential for 1 in 10 homes to become uninsurable by 2035 is a wake-up call for property investors.

This isn’t just about safeguarding your current portfolio; it’s about future-proofing your strategy to thrive in an increasingly unpredictable world.

The key takeaway?

Don’t ignore climate risks when making investment decisions.

By staying proactive and informed, you can not only protect your wealth but position yourself for success in a changing market.

About Aska Soo Aska is a passionate and driven professional with many years of experience as a property consultant helping clients achieve their financial goals through property acquisition. She has consulted clients around Australia by reviewing, educating, and advising clients about their financial situation and what they need to achieve their end goal of being financially free.