Issue 103 – Climate Change is Causing a Flood of Real Estate Problems

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Issue 103 – Climate Change is Causing a Flood of Real Estate Problems

November 1, 2024

It seems just about every week, we receive an update on a hurricane, flood, or tornado making its presence known around the globe and highlighting the loss of homes — and more importantly, loss of life. The damage to structures and how the natural disaster is stopping bustling cities in their tracks is always in the news. Climate change is indeed taking its toll, and not just exclusively on coastal regions. In addition to impacting lives physically, it also impacts them financially through diminished market value and increased insurance costs. To wit: Climate change is becoming the most significant impact on real estate value.

Just last month, we witnessed massive destruction in Asheville, North Carolina, where storm seasons had not typically been a concern. Sadly, that storm was followed by Hurricane Milton, which targeted the Tampa, Florida, area. In October 2024, Tampa Mayor Jane Castor warned residents in evacuation zones that they would die if they stayed behind. We now brace ourselves against extremely devastating weather events from May through November. Many New Yorkers live in fear of another Hurricane Sandy.

One of the by-products of these increasingly intense hurricanes is how homeowners or would-be buyers will be impacted in terms of homeowner’s insurance coverage, without which one cannot secure a mortgage. Moreover, the city’s flood maps are being rewritten, further increasing insurance premiums for many owners; some may even be dropped by their current insurance provider, resulting in properties in highly desirable neighborhoods being unable to sell — or to sell well.

According to The Atlantic, “Across the United States, homeowner’s insurance is getting more expensive. In storm-battered Florida and coastal Louisiana, they’ve gone up a lot; the same is true for scorched Colorado and California. But even Ohio and Wisconsin have seen rate hikes greater than 15 percent in a single year.” Clearly, everyone is affected by this, not just in hurricane-prone areas. And if buyers can’t secure homeowner’s insurance or premiums are prohibitively expensive, they won’t be able to take on a mortgage.

The Economist details this trend as well, explaining, “Private insurers burned by huge payouts after disasters are abandoning risky markets. Homeowners are turning to state-backed insurers as a last resort, which offer less coverage for a higher price. When these plans cannot cover claims, taxpayers are often left with the bill. As climate change continues, the uninsurable parts of America will only grow.” Thus, this outcome becomes the most significant divide in value nationwide and globally.

Yale Connections concurs in a recent story explaining that as storms surge, so do insurance premiums. “Climate futurist Alex Steffen has described the climate change–worsened real estate bubble this way: ‘As awareness of risk grows, the financial value of risky places drops. Where meeting that risk is more expensive than decision-makers think a place is worth, it simply won’t be defended. It will be unofficially abandoned. That will then create more problems. Bonds for big projects, loans and mortgages, business investment, insurance, talented workers — all will grow scarcer. Then, value will crash, a phenomenon I call the Brittleness Bubble.’” This scenario is not something that can be repaired easily.

That publication also cites a 2023 study in the peer-reviewed journal Nature Climate Change that has drawn attention to a massive real estate bubble in the U.S. — property overvalued by $121 to $237 billion because of current flood risk. It warns, “Declines in property values due to climate risk are unlikely to be temporary, particularly for properties affected by sea-level rise … local governments may need to adapt their fiscal structure to continue to provide essential public goods and services.”

According to a 2024 report from Realtor.com, almost 44.8% of homes in the United States, with a total value nearing $22.0 trillion, confront at least one type of severe or extreme climate risk from either flood, wind, wildfire, heat, or air quality.”

It appears FEMA [Federal Emergency Management Agency] is underfunded, understaffed, and has minimal authority. Many are calling on officials to revamp and increase funds to the organization — and create a National Safety Board.

We are no strangers to the impact of hurricane season in NYC. “New Yorkers face thousands of dollars of hidden costs to consider when purchasing a home in a flood-prone area from flood insurance to major construction projects,” a recent story in The New York Times reported. “Across the five boroughs, over $3.6 billion worth of one- to three-family homes sold last year were likely to flood before the end of a 30-year mortgage, according to a new report from Rebuild by Design, a climate resiliency nonprofit. That represents roughly one out of every five such homes sold in New York City in 2023,” the article continued.

It then quoted two other sources: “Flood insurance premiums can range from $350 to $10,000 a year, depending on the size and type of home, policy specifics and the flood history and zone of the area,” said Monroe Shannon, a program manager for resiliency and insurance at Neighborhood Housing Services of Brooklyn, a nonprofit group.

“FEMA mapping does not account for stormwater. There’s a misperception that if you’re not in one of these mapped flood zones, then you don’t need flood insurance, and that’s not the case,” stated a climate expert.

Despite all the perils involved with buying in areas in flood zones and reports of massive moves inland, The New York Times separately reported that some intrepid New Yorkers are throwing caution to the wind — and that New Yorkers continue to spend billions on houses in flood-prone areas despite growing awareness of the effects of climate change.

One such intrepid New Yorker interviewed in the article said, “If you want a house with a good view, close to the water, you know what the deal is.”

Regardless of one’s comfort with risk, this problem will only grow, so ignoring it is foolhardy. Going forward, the real estate community must be fully aware of the impact of climate change and bring their clients up to speed. If those needing insurance can’t get it or afford it, that will eventually impact sales because of the inability to secure a mortgage.

Some experts feel sellers must disclose flood risks when selling their property. In addition, they say insurance rates should be based on the market. In the future, more and more people will need to buy coverage, but those who can’t handle increasing rates might consider canceling flood insurance to their detriment. In fact, Zillow just announced it will include climate risk data for each listing — signaling a definite value creation predicated on mitigating risk.

For now, the real estate community must do its due diligence to best advise clients about potential risk versus reward, allowing one to make sound investment choices and get the most value from their property ownership. While the 2024 hurricane season has passed, extreme storms are the new normal, and we all need to remain aware of climate change and its impact, especially as we move forward.

Issue 122 – Foreign Demand Re-Emerges as Luxury Buyers Underwrite Political Risk

June 1, 2026

As we head into summer, we are seeing a very notable resurgence of international buyers entering the New York market — and frankly, in a way we haven’t seen in years.

Let’s explore why.

Historically, global capital gravitates toward stability, discretion, and internationally recognized assets. In New York City, that typically translates to park-facing residences, trophy properties, and globally recognizable “name-brand” buildings. These include Aman, Four Seasons, Related developments, and legacy Park Avenue or Central Park South product with strong service infrastructure and long-term value preservation.

Right now, buyers are looking for quality, security, and assets that feel insulated in uncertain times. NYC, despite all the headlines, remains a strong, long-term store of value internationally.

When there is instability abroad, New York City benefits. It offers legal transparency, deep liquidity, world-class education, finance, culture, and healthcare — and a real estate market that, while imperfect, is still well understood around the world.

What’s different now is that buyers are not necessarily purchasing because they think New York is “hot.” They are buying because New York is established. That is an important distinction: the capital is less speculative and more preservation-oriented. For many international families, a New York apartment is part lifestyle asset, part hedge, part legacy planning.

The headlines about wealthy buyers fleeing New York City are often too simplistic. Yes, some buyers have moved capital to Florida, Texas, or other lower-tax markets. But that does not mean New York has lost its global relevance.

The newly announced pied-a-terre/second-home tax in New York targets luxury second homes valued at $5 million or more, with the goal of creating an annual surcharge on non-primary residences. This proposal is certainly something international buyers are paying attention to, though it remains to be seen if this will impact continued investment. Rather than eliminating foreign demand, the tax likely makes buyers more selective, becoming part of the broader cost-of-ownership analysis alongside the mansion tax, carrying costs, and currency exposure. It may create pause around marginal purchases, but for a trophy asset, it won’t stop the buyer. It simply raises the bar for what feels worth owning.

The concern is less the dollar amount itself and more the perception. International buyers are highly sensitive to whether a market feels welcoming, predictable, and stable. Policy often moves perception before it moves fundamentals.

We’re consistently seeing foreign buyers generally gravitate toward turnkey product. The appetite for renovation or operational complexity is far lower than it once was. Buyers want ease, service, security, and a property that immediately translates internationally, both from a branding and lifestyle standpoint. For these global buyers, New York remains one of the few carrying both emotional and financial prestige.

Enter: Japanese buyers. The Real Deal recently reported a massive resurgence in Japanese capital, providing a lifeline to aging multifamily walk-ups. “Japan-linked firms have acquired at least $2.1 billion worth of New York City property since the start of 2024, according to analysis by Okada & Company and TRD Data,” the piece details.

This surge is driven by a stark yield gap: With low interest rates at home, Japanese buyers can borrow cheaply in Japan to acquire higher-yielding assets, a strategy supercharged by domestic tax incentives for multi-family purchases.

We are also seeing diversifying residential demand from Australian, Brazilian, Taiwanese, and Western Europe buyers. Eastern European activity is still highly selective compared to prior cycles, but international demand as a whole has undeniably re-entered the market. The usual suspects — such as Central Park South, Tribeca, Billionaire’s Row, and select Downtown properties — remain the primary anchors.

Target price points for these foreign investors vary by country of origin and the purchase’s purpose, with the most active international demand falling into clear segments:.

The serious lifestyle buyer ($3M to $7M): Typically targets a strong two or three bedrooms in a premier building, prioritizing service, security, and an easy lock-and-leave lifestyle.

The wealth-preservation buyer ($7M to $15M+): Focuses heavily on blue-chip locations — Central Park, Fifth Avenue, Park Avenue, Tribeca, Billionaires’ Row — or globally recognized branded residences.

The ultra-high-net-worth buyer: Prioritizes the asset above any price point, focusing on scarcity, pedigree, privacy, views, service, and long-term relevance. They are not asking, “Is this affordable?” They are asking, “Will this matter 10 years from now?”

Today’s foreign buyer is much more disciplined. They want turnkey and certainty. They want building quality, service quality, financial stability, and a residence that translates globally.

The biggest shift is that foreign buyers are not chasing the market — they are underwriting it. They are asking better questions: What are the monthly carrying costs? Who is the resale audience? How strong is the building financially? How liquid is this asset? Does this location hold value in multiple cycles?

Overall, cultural nuance matters more than ever. Buyers are underwriting not just the apartment, but NYC itself.

Five years ago, there was still more appetite for optionality — buyers were more willing to consider renovation, new development premiums, or speculative upside.

On the Japanese side specifically, what I’m noticing is a renewed comfort level with NYC real estate as a legacy asset class. The buyers I’m seeing tend to be highly analytical, long-term focused, and extremely quality-driven. They’re not chasing hype — they’re buying permanence.

The Brazilian and Australian buyers we’re seeing tend to be incredibly lifestyle-oriented while still highly aware of long-term value, whereas many Western European buyers continue to prioritize pedigree buildings, architecture, privacy, and stability. Taiwanese buyers similarly appear very focused on security, quality, and established global positioning.

For foreign investors, New York City still represents something very specific: legal stability, cultural prestige, liquidity, access, education, healthcare, and global identity. The buyers I’m seeing are not ignoring the headlines. They are simply looking past them when the asset is strong enough.

New York is no longer a market where everything trades easily. It is a precision market. But for the right property — the right building, the right view, the right service, the right location — foreign buyers are still very much there.

The common denominator across almost all of them is that they are buying selectively — but decisively — when the product feels globally relevant.