Real estate market and climate change
In its latest Financial Stability Report, the Bank of Spain analyzes the impact of the “Mar Menor” ecological degradation process on the real estate market, in an exercise similar to estimating the costs that the physical risks associated with climate change would have. This type of exercise helps to visualize the possible impacts of climate change. The Bank of Spain points out that while the cost of acting is known with some precision (the necessary investments), the benefits (costs avoided because the risk do not materialize) are much more uncertain. That makes it difficult to make decisions and carry out actions in the present that could mitigate potential risks to financial stability.
- Loss of wealth in households due to the impact on the value of their homes. In the case of the “Mar Menor”, estimates point to more than 4,000 million.
- Potential impacts on the conditions and credit quality of those loans that use as collateral homes affected by ecological degradation.