Homeowners in some of Britain’s wealthiest districts face a drop in property values and the prospect their homes may be uninsurable as record floods blight towns along the River Thames.
About 5,800 homes have been flooded in towns including Chertsey, Egham and Datchet after England endured its wettest January since 1766. Almost 55,000 homes with a combined value of about £21 billion (Dh128.36bn) are in areas subject to severe flood warnings, according to property broker Savills.
“The repercussions for property asset values are absolutely huge,” says Hugh Fell, a managing partner at the property broker George F White and a former member of the Royal Institute of Chartered Surveyors valuation board. Some homes will be “virtually unsellable”, he says.
While the floods have not posed a serious threat to London’s property market, where home prices have gained 40 per cent since April 2009, the hardest-hit areas have been commuter towns along the Thames that have benefited the most from the housing boom, a string of historic villages along the Thames in the counties of Berkshire, Hampshire and Surrey.
Virginia Water, the first town outside London where the average house price exceeded £1 million, according to the website Zoopla.com, has been under a severe flood warning. The town is home to the Wentworth Golf Club, set to host this year’s European PGA Championship, as well as properties owned by the musicians Cliff Richard and Elton John.
In Hurley, a rural area in Berkshire, the Olde Bell Inn that dates to 1135 closed its doors until at least this week. Eton and Castle, home to the Eton College private school attended by the prime minister David Cameron, has also been endangered. The 817 homes there are worth £690,000 on average.
“If I’m asked to go and value a property for the bank, I’ll be asked to comment on its marketability,” says Mr Fell.
“If it’s flooded or at future risk, it’s going to be really difficult to sell. As soon as you say that, the mortgage company will say it’s not suitable for lending.”
A property that cannot be mortgaged loses 70 per cent of its potential buyers, he says. A home that becomes uninsurable, and therefore only available to cash buyers, loses as much as 20 per cent of its value, according to Richard Sexton, a director at the property appraisal firm e.surv. River levels on the Thames, although falling, remained high after more than two months of downpours, the UK environment agency says on its website. Water from rainfall is filtering down to areas already inundated after earlier storms, according to the agency.
The environment agency downgraded 14 severe flood warnings for the River Thames last week, leaving two in place on the Somerset Levels yesterday in south-west England. There were 13 flood warnings across the south-east of the country.
A preliminary agreement signed in June by the government and the Association of British Insurers would change the current system where homeowners in low-risk areas subsidise those living where flood danger is high. A new plan set to start in 2015 would exclude any home built after 2009 or in the highest tax band. It also would not include leasehold properties or council homes.
Homeowners in areas with a high flood risk have been able to buy insurance with no cap on its cost as part of the deal reached between insurers and the government in 2000. Flood RE, the new agreement being considered, would create a fund to provide payouts for properties insurers won’t cover.
“The whole issue of flooding has become immediate, as opposed to it being a problem once in every 100 years,” says Clive Beer, the head of rural professional services at Savills. “So even if you can get insurance, the premium you need to pay is going to be a huge factor.”
Insurance costs may reach £1bn by April, Deloitte said last week.
Mr Cameron said money is “no object” in tackling the effects of the floods and last week announced a £10m support programme for affected businesses. That’s on top of a February 12 pledge to make £10m available for farmers to repair damage and install flood-prevention equipment.
The environment agency has ordered temporary defences from Sweden and the Netherlands. It has erected barriers in Chertsey, after working to protect the southern cathedral city of Winchester from the rising River Itchen.
“Anybody that has suffered a flood event in a house will tell you how bloody miserable it is, shovelling out mud and sewage while all your possessions are damaged,” Mr Fell says.
“People are going to pay less money for a home that has flooded.”
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