Does Being in a flood risk Area Affect the Value of a Property?

In their publication ‘ A clear guide to flooding for Property owners’ The Royal Institution of Chartered Surveyors (‘ RICS’) state that flood risk does reduce the value of a property when the property is compared to a similar property which does not suffer from a flood risk. As it is Surveyors who generally set the valuation for mortgage lenders and banks, you could say that this is ‘from the horse’s mouth’.

How much a known flood risk will affect the value of a property will depend on several different factors ranging from how often the property (or neighbouring properties have flooded); the measures taken by the property owner to mitigate flooding ( flood defences etc); the construction of the property (is it made from materials resilient to flooding ? and to a design drawn up to mitigate flood risk?); to the insurability of the property and location of a property ( many insurers will begin to hike up the premium if the property is within 100m of water).

Buildings Insurance for Properties in Flood Risk Areas

If a property becomes uninsurable , it will be almost impossible to raise a mortgage on it and this severely limits the market in which it can be sold. The flood risk does not have to be particularly high in order to affect the cost of buildings insurance. In their publication, RICS cite (from ABI Climate Adaption), the example of a property in a flood risk area rated an annual probability of flooding as being 0.5% ( 1 chance in 200). If the average home in that flood risk area were to flood to a depth of 0.5 metres the damage likely to be caused (£30,000.00-£40,000.00) is still equivalent to average damages of £150.00 -£200.00 per year requiring a premium of around £350.00.

Although flood risk is a major factor in the effect on the valuation of the Property, it is not the only factor, as the flood may have caused damage to the fabric of the property and its appearance.

Flood Risk may be offset by a popular location when valuing property

In their publication RICS are quick to say that ‘for some ‘at risk’ properties the reduction in value due to flood risk may be offset by an increase due to the property’s amenity value for example if it is close to a river, stream or coast. Oxford, a town which has a high flood risk in many areas is a classic example of the amenity of a property offsetting the effect of being in a flood risk area. In the Oxford Mail recently Damian Gray, a partner at estate agents Knight Frank in the Summertown area of Oxford states that he does not anticipate floods putting off potential buyers , he says “if you are near a river, one has to take into account the risk and balance that against the beauty of living near a river’ he added ‘ I don’t think it affects people a great deal anymore. If you continuously flood then one would question whether it is the right thing to buy’.

Indeed it is the writer’s experience having lived in Oxford for 26 years that even in areas that flood every year the house prices continue to be high and rising despite the obvious flood risk.

Does Flood Risk Affect the Decision to buy a Property?

The fact that a property is in a flood risk area should put the buyer and their conveyancer on notice . Questions should be asked as to :
  • Whether the property has flooded in the past
  • Whether neighbouring properties have flooded
  • Whether the owner is able to get buildings insurance with a reasonable level of premium and excess
It is also important for the conveyancer to make sure that the client is aware of the consequences of buying a property in an area with a high flood risk. The writer recalls the client who purchased a property on the sea front at Penzance which was duly flooded in a storm. The client complained that the conveyancer had not pointed out the fact that the property was potentially at risk of flooding. The conveyancer was able to point out the paragraph in the conveyancer’s original title report to the client, that mentioned the high flood risk.

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