The Financial Implications of Buying a Home in a Flood Risk Area

There is little doubt that flooding in the UK is on the increase and will continue to be in the future. The Environment agency recently announced a warning saying that after 10 years of increased flooding that intense bouts of flooding are set to become more frequent. There is no more speculation, this is real and it will be an ongoing issue from now on and has been for many people for years.  Regardless of your position about why it is increasing the fact remains; flooding is here, it is real and it has huge implications for the property and insurance market and for the population as a whole.

Finance and Flooding

Despite there being many issues for people when it comes to flooding the bottom line is often a financial one. The facts are simple; more flooding means more claims and that means higher premiums. The potential value of homes in flood areas is likely to be affected and the cost of government flood protection projects must be funded from tax money too.

At Risk Areas and Property

Some claims state that 1 in 6 UK homes are at risk of flooding. But this risk is often less serious than it sounds. Many properties are in an at-risk area but have never actually flooded. When it comes to buying a property in a new area it is very wise to consider a flood risk assessment. This will give a clear idea of the risks for any given property or development and that puts the buyer in a strong position. While these reports do cost money they provide invaluable information and that can empower buyers, sellers and owners and allow them to plan financially.

Survey

Another key process to employ during any kind of house sale but especially in a flood risk area is a full building survey. In every town across the UK there are companies like Chiltern Associates who provide detailed property reports. It may seem obvious to have a survey but in a flood risk area it is worth pursuing a more detailed approach in terms of any previous flooding. By looking at past flood data and flood risk assessment information along with detailed structural information a picture can be created of the issues as the associated costs!

Insurance

This is a big part of buying any property and especially in a flood risk area. Be prepared…the cost of insurance in an “at risk” area is going to be more. But that may not be an issue if the rest of the numbers stack up. Don’t forget, insurance is there if something happens and if you can be comfortable that the odds are very low then the premium is worth paying. The cheapest quote may not be the best so look at the cover as well as price. The implications of increased flooding will affect premiums across the board but the impact within risk areas is sadly only going to go up. There is a new government backed insurance scheme called Flood Re which is designed to help people get cover in high risk areas, this type of non-profit scheme may become more common in the coming years.

The Cost of Preparation

As with insurance, buying in a flood prone area can work. By considering some prevention and mitigation options a property can be well protected. Financially this kind of thing needs to be looked at with a potentially lower purchase price and higher insurance costs.

Flood Proofing

Simple measures like proofing windows and doors are an easy first step. Beyond that consider changing the garden and driveway to allow for better run off and water absorption. If the property has a big driveway it might be beneficial to look at alternative materials that drain better than tarmac. Rain gardens can capture water and swales and banks in the garden can also help. While these things all cost money, they can have a huge impact.

Drainage

A very simple and low cost flood preparation is to make sure all the drains are clear and working well. It could prove very costly if a slow flowing drain can’t cope. Companies like The Drain Guys are able to clear, maintain and survey drains both inside and out. As flooding becomes more common it is likely that an annual drain survey will grow to be as normal as it was to have a chimney swept. This is a small outgoing to save considerable outlay on flood damage repair.

Selling a Property After Flooding Becomes an Issue…is it too late?

It is certainly a big worry for a lot of property owners; the idea that they may be stuck in a home no one will buy, they can’t afford to insure and that will flood again and again. Well thankfully this is quite rare. It is important to remember that some people will still be happy to buy because they either don’t feel the risk is high enough or they can afford to put in measures to prevent it being a problem. Living near water is and will always be popular and for many the natural pull towards a waterside lifestyle is greater than the fear of flooding. That being said it is important to consider the risk of being caught in negative equity of the house price drops because of flooding. It is also important to think about the potentially long selling period that may occur if people just do not want the property. There is always a final option and that is to use a home buying service. These companies offer a sub market value price but will buy a home regardless of many issue a normal buyer will worry about. You may loose a little overall but the sale will go through!

The financial implications of buying in a flood zone are likely to get more severe rather than decrease overtime but as government legislation comes into play and civil engineering flood projects get underway it may not spiral as fast as some may think and in the mean time there could be some bargain homes to be had for some people!