In recent years, the so-called “once in a century” torrential rainfalls or “once in 50 years” floods have been occurring yearly in not only Japan but also around the world, causing massive damage and loss. Although the news of the physical and economic damages caused by climate change has been widely reported around the world, as I wrote in my post last week, however, one does not hear too much about the impact these disaster risks have on real estate asset values. Perhaps, this realization is felt only by those limited number of people who were directly affected by the disaster.
A severe Polar Vortex hit large areas of the United States last week. What surprised me the most was that the southern state of Texas, which is usually relatively warm even in winter, was iced by a true major “once in a century” polar winter weather. Even the city of Dallas reached a punishing -21℃. Water pipes ruptured, springing water leaks or water pumps froze, cutting off water supply. Electricity transmission systems broke down, causing power outages over a wide area. It is said that 4 million people in Texas alone went without power for several days, creating life-threatening conditions. Since Texas is a state also with a lot of farmland and ranches, it is also a real concern as to what kinds of adverse effects this severe cold weather has had on crops and livestock.
Nevertheless, in recent years, the population of Texas, as a nice, easy-to-live place, has been growing rapidly and, to reflect that, real estate prices rose accordingly. I am, however, concerned not only about the amount of direct damage to structures, such as residential homes, due to the great cold wave unprecedented in Texas history, but also how the damage caused by these natural disasters will indirectly lead to prices of gasoline, electricity, property insurance premiums, staple foods and meat, spiking higher. Worrisome is the degree to which this will impact the livelihood of people in not only Texas but also in the U.S.
We will never know when the same thing might happen in Japan, so it would be wise not to dismiss it as a “fire on the opposite riverbank”, as the well-known Japanese adage goes. I believe we have now entered a stage in time where we need to think from a much more comprehensive perspective, which considers natural disaster risks, when making real estate purchase decisions.