Flooding cuts 8.2% off average Canadian home sale prices, says study
Flooding in Canada experienced in the last decade cut an average of 8.2 per cent off the sale price of homes in several markets, says a new study.
The Intact Centre on Climate Adaptation at the University of Waterloo studied several floods that occurred between 2009 and 2020 in Grand Forks in British Columbia; Burlington, Toronto and Ottawa in Ontario; and Gatineau in Quebec, BNN Bloomberg reported on Wednesday.
Data suggests that houses selling last December for an average price of $713,500 would instead go for $654,993, once hit by a flood, reflecting a loss of $58,507, says the study that was partially funded in part by Canada Mortgage and Housing Corp.
Floods also reduced the number of homes available for sale by 44.3 per cent and increased the number of days they spent on the market by 19.8 per cent, according to the report.
The reduction in listings could be due to an expectation of a lower listing price in the aftermath of flooding, but may also reflect people waiting for the “stigma” of flooding to pass or the time required to remediate a house following flood damage prior to listing.
“Arguably, 44.3 per cent fewer house listings reflects stress on those who would otherwise position their house on the market,” the report said, adding that the impact extends to other stakeholder in the real estate sector, including real estate agents, stagers, lawyers, mortgage brokers and lenders.
The study called “Treading Water: Impact of Catastrophic Funding on Canada’s Housing Market” also looked at the impact of community-level flooding on mortgage arrears and deferrals in two unnamed cities for six months before and after flooding.
Researchers found no change in the ability of homeowners in those areas to pay their mortgages, but a reduction in the appraised value of a house due to flooding influenced how much mortgage providers were willing to lend.
Ultimately, the researchers concluded that Canada needs to act fast to combat flooding risks and their impacts on housing and mortgages.
“The bad news regarding the impact of flooding on residential housing is that climate change and extreme weather-related flood risk, at times combined with poor land-use planning, will get more challenging across many regions of Canada, and if left unchecked, will increasingly distress the residential housing market,” the report said.
It recommended that the country could start by getting municipalities, banks, insurers, and real estate associations to advise homeowners on how to lower the risk of basement flooding.
The federal government should update flood risk maps to help municipalities and engineers identify and remediate trouble areas, but could go even further and develop a system like the U.S. has that establishes a flood risk score for any residential property, the report said.
It also recommended Canada get governments to commit to retaining and restoring natural infrastructure like forests and wetlands and press communities into identifying and protecting areas most at risk of floods.
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