- According to a United Nations report, Africa experiences an annual economic loss ranging from $7 billion to $15 billion due to climate change impacts.
- 16% of Kenya’s 213 natural heritage sites and a staggering 30% of its 71 cultural heritage sites are exposed to the threat of a 100-year coastal extreme sea level event.
- Rising sea levels in Kenya’s coastal regions are identified as a major concern for the housing market, as they pose risks to homes, infrastructure, and coastal property values.
The Africa Climate Summit held at the Kenyatta International Convention Centre (KICC) that just concluded in Nairobi, Kenya, serves as a stark reminder of the far-reaching effects of climate change.
The Nairobi summit is a collaborative effort between the Kenyan government and the African Union, coinciding with Africa Climate Week. Under the banner of “Advancing sustainable growth and climate finance solutions for Africa and the global community,” it seeks to address pressing climate-related challenges.
As the world grapples with extreme weather events, rising temperatures, and other climate-related challenges, the real estate market is not immune to these transformations.
A United Nations report from 2022 projected that Africa bears an annual economic loss ranging from $7 billion to $15 billion due to the effects of climate change. Here, we explore how climate change affects real estate prices and the short- and long-term implications on the Kenyan market.
Table of Contents
Climate Change is a Global Challenge
In Kenya, climate change is no longer a distant concern but an immediate and undeniable reality. The prolonged droughts in Northern Kenya, floods all over the country, and increasing frequency of extreme weather events are transforming our environment and, in turn, affecting our real estate market.
Coastal communities face rising sea levels that threaten not only homes and businesses but also property values. A report titled ‘African heritage sites threatened as sea-level rise accelerates’ published last year, states that a concerning 16% of our 213 natural heritage sites and a staggering 30% of our 71 cultural heritage sites are currently at risk of experiencing a coastal extreme event that has a 1-in-100-year probability of occurring. This includes flooding.
The rising sea level in our coastal regions has already begun to erode seagrass cover, a natural guardian of our coastlines making it prone to flooding.
Additionally, insurance costs are on the rise, impacting the affordability of homeownership. It is therefore imperative that we recognize the urgency of climate action and work together to adapt, and protect our communities.
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This will ensure a resilient future for Kenya and the world at large.
Factors Affecting Real Estate
Several factors are currently affecting the real estate market, and their impact is growing more pronounced:
- Rising Temperatures and Housing Costs: Higher global temperatures lead to extreme weather events and increased sea levels. These events, in turn, result in destructive storms, flood risks, and soaring utility costs. The heightened demand for electricity and water puts upward pressure on prices, impacting homeowners’ budgets, particularly in densely populated areas.
- Extreme Weather Events: The impacts of extreme weather events are keenly felt in the Kenyan context. Properties in flood-prone areas face the risk of damage and depreciation, leading to decreased property values. The unpredictability of extreme weather events also complicates property investment decisions, making it crucial for real estate developers and investors to consider climate resilience and adaptation strategies when planning developments.
- Rising Sea Levels: The escalating threat of rising sea levels presents a paramount concern for the housing market, particularly in our coastal regions. As sea levels steadily rise at an alarming rate of roughly 0.13 inches (3.3mm) per year, the vulnerability of coastal communities to frequent and devastating floods intensifies. Homes, infrastructure, and valuable coastal properties stand at risk, posing a direct challenge to property values and insurance costs.
Current Impact on Real Estate Prices in High-Risk Areas
While the full impact of climate change is yet to be realized, it’s already affecting real estate prices in high-risk areas. Some of the impacts being felt include:
- Decreased Sales Prices: Climate change can lead to decreased real estate sales prices in Kenya, particularly in areas that are highly vulnerable to climate-related risks. For example, properties in flood-prone regions that are at greater risk of flooding may experience declining property values. Buyers and investors may perceive these areas as less desirable due to the increased risk of damage and disruption from extreme weather events, resulting in decreased demand and, consequently, lower sales prices. Additionally, higher insurance costs in such regions can further deter potential buyers, contributing to the downward pressure on property prices.
- Fewer Home Sales: The reluctance to live in high-risk areas has resulted in fewer homes being sold along coastlines and other vulnerable regions. This could be indicative of a future decline in coastal property sales, with wealthier homeowners relocating to safer areas while lower-income individuals remain exposed to flood risks.
- Increased Insurance Costs: Homeowners in high-risk areas are already experiencing higher insurance costs due to climate change-induced events. Extreme weather events have prompted insurance companies to raise premiums, while flood-prone regions require additional coverage.
A Unified Response at the Africa Climate Summit
As Kenya hosts the Africa Climate Summit, it’s evident that climate change is no longer a distant threat but an immediate concern for the real estate sector and society at large. The summit’s overarching goal is to drive climate-positive growth and finance solutions, aligning with the urgent need to address climate-related challenges in Kenya and across the continent.
In conclusion, the Africa Climate Summit provides an opportunity for Kenya to take a leading role in climate action and sustainable real estate practices. As the effects of climate change become increasingly apparent, the real estate sector must adapt to mitigate risks, invest in sustainable solutions, and contribute to a resilient and prosperous future for Kenya.
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