The machinations of the International Monetary Fund are of little interest to most householders but a change at the top is about to impact on house finance and it seems an absolute certainty that we about to see the greatest market change in a hundred years.
When legendary Frenchwoman Christine Lagarde headed the fund it ignored global warming and concentrated on market stability. The recession that hit in 2008 caused a momentary scare, but a scarcity of buyers and a drop in the asking price quickly evaporated and the price spiral recovered its ever upward climb.
The new managing director of the International Monetary Fund is Kristalina Georgeiva (66), an environmental economist from Bulgaria. The cities of the world that are leading this housing price spiral are Sydney and Hong Kong and here the median house price is hovering close to a million dollars. What is being studiously ignored is the effect rising sea levels will have on land fronting beaches and where building on river flood plains is now expanding. Science tells us this will be very apparent by the middle of this century - and that is just thirty years away.
We have had a waning of what to expect. In 2016 a storm off our east coast created a sea surge that stripped away beaches at Collaroy and destroyed the foundations of a group of beachfront homes. Both the oil and the coal industries have been spreading doubt on global warming in an effort to protect their markets and the very homes that are most at risk are the ones attracting the highest resale prices. These days a home fronting onto a beach is a multi million dollar proposition and usually attracts a mortgage that reflects that price tag.
The demand for new homes is seeing new estates built on flood plains beside rivers with the claim that they may see hundred year flood events. A rising sea delivers rising river levels and within the span of many existing mortgages that flood may be a matter of when the daily high tide arrives. That the banks are still freely lending for properties that will be subjected to flooding is madness.
It is likely that the diktat of the International Monetary Fund is about to bring change and for ordinary citizens the financial aspect can be devastating. The price expectation of the home we live in is the foundation of our personal wealth. What it is worth is decided by what others are prepared to pay for it and if the banks refuse to finance new loans that value will drop very sharply. It seems obvious that this global warming equation and rising sea level is about to impact on the valuation of all low land - and it is the priciest suburbs that will be hit the hardest.
The banks have been ignoring this risk because the seeming inevitability of ever upward house price inflation has brought stability. Should a borrower default on a loan, returning the home to the market ensures a plurality of buyers and now the long term effect of climate change on house prices is about to impact on those areas which will feel the first effects of rising sea levels.
It was inevitable that this housing price bubble would eventually burst but the effect will be felt hardest on the areas which presently are the most attractive to buyers. It is the ambition of many to live in a beach front home, and that home price is accordingly high.
It seems that home elevation on a flood map will be the new valuation index that will determine mortgage eligibility - and the price level !
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