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Flooding Causes Short-term Dip in House Prices, Longer Selling Times

Flooding is not only a hassle to clean up, but there’s now hard data showing that it has a short-term impact on home prices.

Impact of floods on home prices

Any homeowner wading shin-deep among their ruined possessions and half-drowned storage boxes knows that flooding has become a real concern in Canadian cities over the past decade.

It’s not only a hassle to clean up, costing an average of $43,000 in damages, but there’s now hard data showing it also has a short-term impact on home prices.

Over the past eight years, catastrophic flooding caused an average 8.2% drop in the final sale price of affected homes. It also caused them to languish on the market around 20% longer in the six-month period post-flooding, says a new report from the Intact Centre on Climate Adaptation from the University of Waterloo.

The study focuses on five cities that experienced severe flooding between 2009 and 2020: Burlington, Toronto and Ottawa in Ontario; Gatineau, Quebec; and Grand Forks, British Columbia.

Let’s say a home was set to sell at January’s average national price of $748,450, but then the neighbourhood experienced a huge downpour leading to widespread flooding. Over the next six months, a home in that neighbourhood would only sell for roughly $687,000, or a “flood discount” of $61,450.

The report noted that the median time to sell a house in Canada is 65 days, based on 2021 data, meaning a house in a post-flood zone would sit on the market for an extra 13 days on average. After six months, however, these negative flood effects largely disappear.

The authors of the study saw no effects on mortgage defaults.

“The consequences of flooding appear to be relatively immaterial regarding mortgage arrears, particularly considering that impacts would generally last only a few months post-flood,” according to a 2019 study cited by the report.

Flooding becoming a more costly problem

Flooding has become an increasingly serious problem over the last several decades.

Between 1983 and 2008, catastrophic insurable claims in Canada hovered around $250-450 million per year, whereas from 2009 to 2021, claims averaged $1.96 billion annually, with more than half of this increase due to flooding. That means insurance companies are now paying out over triple the amount annually that they were in the 1980s, 1990s and 2000s.

Experts attribute this partly to climate change and increased rainfall, but also to development and urban sprawl. There are now simply fewer wetlands and grasslands left to absorb rainfall, particularly in urban areas.

Unfortunately, current flood risk maps are outdated, so it’s difficult to know how at-risk a region is. However, Natural Resources Canada is dedicating $63.8 million over the next three years to developing new maps to help homeowners assess the risk of their property and to help city planners develop better infrastructure to cope.

To help prevent flooding of your property, the Intact Centre recommends a few easy measures, such as getting and testing a sump pump, moving the drainage pipe away from the foundation of your home and cleaning out eaves-troughs twice a year.

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Last modified: February 17, 2022

Danielle Kubes is a personal finance writer based in Toronto.