A fairly consistent argument in favour of not doing too much now about global warming is the perception that the main impact both physical and economic will occur well into the future - usually at least 50 years hence.

Even if the the more extreme physical / environmental impact is delayed until that point, the economic effects will be felt much sooner.

Impact on house sales.

It is only in that last few years that insurance rates have risen significantly - or the refusal of insurance altogether - for houses that are in areas that are likely to flood, or have flooded recently. This has had a knock on effect on the local house market in that people will be able to identify risk areas and there will likely be a noticable drop in local house prices.

Mortgages are still available for those houses, the financial impact is limited to insurance and further limited to inland areas with a risk of river flooding.

Sea Levels Rising - but not quite yet

Sea levels are not expected to rise to a level where there is an appreciable risk for the next 50 years or thereabouts. However, that timescale should have an impact on the sale of mortgages now.

Taking the example of leasehold properties, anybody purchasing one of these with a mortgage will have to show that there is at least 80 years outstanding on the lease. As lease years are used up the residual value of the property is assumed to decline thus reducing the collateral or gearing of the loan.

Mortgage companies want to be sure they can sell your house to pay off the loan in the event that you can no longer afford it.

Impact of Global Warming

Taking this analogy into the impact of global warming. If we assume, possibly conservatively, that sea levels will rise by 1/2 possibly 1 metre in the next 50 years, we have have many 100,000s if not millions of homes that then risk inundation. In practical terms, any 1st time buyer (young buyer) buying one of those houses will likely see it flooded in their lifetime.

Of course they will have moved up the housing ladder by then, however if they remain in the house for 7 years (average time between moves), they will need to sell it to somebody who now has 43 years before the house will be inundated and who will in turn expect to sell it to somebody who can expect only 34 years of use!

Would you lend money on a depreciating asset?

Would any mortage company provide a loan for a property that might not be around in 34 years? Bear in mind it is not the 34 years, which is 9 years more than a 25 year mortgage term, it is the fact that the large loan is secured on a house that is now depreciating asset. The same applies at the 43 year point and at the 50 year point though perhaps less so.

Of course a 1 metre sea level increase isn't going to overwhelm our coastal towns, the 1 meter added to a normal spring tide will come close. Add a storm surge and the increased severity of storms due to global warming and that 1 metre more than makes a difference!

But its not going to happen - these figures are unrealistic. I agree, but had I written (prior to it happening) that Cheltenham would be considered for evacuation due to flooding!

Increased Premiums on seafront (and flood plain) properties!

So, over the next few years we will most likely see a premium placed on mortgages for houses that are at or below the 1 meter above current sea level. This will result in a decrease in price for those houses within that area and a corresponding increase for those that are beyond the area. This early period starting in the next few years could be considered a general warning which will most likely be ignored, especially if there is a price advantage.

The big impact will come when we have a significant storm surge at a time of high tide resulting in localised sea flooding. At that point we can expect a price crash for near sea level houses as the earlier warnings are reinforced by reality.

There is a silver lining though - but only for speculators!

Following the floods in Yalding in 2000, the prices of just about all local property plummeted. Now (2007), they have recovered and Yalding is again a very costly twon to move into - not only do people have short memories, but newcomers seldom do their research and assume it will not happen to them.

If I had spare cash I would buy discounted properties in the currently flooded areas, rent them out, wait for 5 years and sell them at the normal going rate!

The cold and costly reality of climate change ft.com

Al Gore's speech on Climate Change