Climate risk has entered the mainstream of property investment analysis. What was once considered a distant, speculative concern is now affecting insurance premiums, mortgage availability, and property values in specific locations across all of our eight investment markets.
This guide covers the key physical and transition climate risks by market, the insurance implications, practical due diligence steps, and a framework for incorporating climate risk into investment decisions.
Why Climate Risk Matters to Property Investors
Property is a long-duration asset. A purchase made today may be held for 10, 20 or 30 years — a timeframe over which climate trends are likely to become materially more significant. Even for shorter hold periods, climate risk affects:
Insurability — Properties in high-risk flood or fire zones face significantly elevated premiums or, in extreme cases, no available insurance cover. An uninsurable property is extremely difficult to mortgage, sell or let professionally.
Mortgage availability — UK lenders have begun factoring flood risk into mortgage terms. As climate-related losses increase, more lenders in more markets are likely to introduce similar restrictions.
Resale value — Buyers are increasingly aware of climate risk. Properties with known flood, fire or subsidence risk attract lower prices and take longer to sell.
Rental demand — Extreme heat events and flooding directly affect the desirability of locations for short-let tourism. A destination that becomes uncomfortably hot in summer, or experiences regular flood disruption, will see reduced tourism demand.
Physical Risks by Market
United Kingdom: Flooding
The UK's primary climate risk for property investors is flooding — from rivers (fluvial), the sea (coastal), and surface water run-off (pluvial). The Environment Agency estimates that approximately 6.3 million properties in England are in areas at risk of flooding (Environment Agency, 2024 national assessment).
Due diligence: Check any property at the Environment Agency's Long Term Flood Risk Assessment service before purchase. Pay particular attention to:
- Flood Zone 3 (high probability, 1-in-100 years or more frequent) — represents the highest risk
- Surface water flood risk (often underestimated; affects properties far from rivers)
- Flood history of the specific property (request this from the selling agent)
Flood insurance for high-risk properties is increasingly expensive. Flood Re (the government-backed reinsurance scheme) provides some protection for residential properties built before 2009, but is not available for buy-to-let properties. New builds and commercial investments in Flood Zone 3 are effectively excluded from the scheme.
Spain: Wildfire and Drought
Spain faces two distinct climate risks:
Wildfire affects inland and elevated coastal areas, particularly in Andalucía, the Canary Islands, Valencia and Catalonia. The 2023 Canary Islands wildfires destroyed over 15,000 hectares. Rural fincas and villa developments on hillsides in fire-prone regions face rising insurance costs. Some local authorities have introduced restrictions on new building in wildfire risk zones.
Drought and water scarcity is chronic across much of southern Spain. The Alicante province (Costa Blanca), Murcia and parts of Andalucía experience severe water restrictions in dry years. Desalination infrastructure is expanding, but water supply costs are a factor for ongoing property ownership.
Due diligence: Check the local municipal government's fire risk zone designation and the Confederación Hidrográfica for water availability. Ask for a local insurance quote before completing — premium levels reveal a great deal about the risk assessment applied to a specific location.
Greece: Wildfire
Greece experienced severe wildfires in 2021 (Evia), 2023 (Rhodes, Corfu, Attica) and has seen increasing fire seasons in recent years. Properties in elevated or forested areas carry greater exposure. Coastal properties are generally at lower direct fire risk, though smoke events affect the wider area.
The Hellenic Cadastre is in the process of designating forest and reforestation zones — building within these zones is heavily restricted, and properties with ambiguous planning status in affected areas face particular risk.
Due diligence: Check whether any part of a property's land sits within a designated forest zone (dasiko). Properties with construction that pre-dates formal planning records should be examined carefully by a local lawyer for any outstanding regularisation issues.
Indonesia (Bali): Volcanic Activity and Earthquakes
Bali sits within the Pacific Ring of Fire. Mount Agung (3,031m) last erupted significantly in 2017–2019 and caused temporary airport closures and tourism disruption. Mount Batur (1,717m) is also active. Earthquakes are frequent across the Indonesian archipelago; the 2018 Lombok earthquake (neighbouring island) caused significant damage and affected tourist sentiment toward the broader region.
Due diligence: Properties in north-east Bali, in closer proximity to Agung, carry greater volcanic risk. Southern Bali (Seminyak, Canggu, Ubud, Nusa Dua) is geographically more distant. Earthquake risk is broadly distributed. Building construction standards in Bali vary significantly — verify the structural specification of any building, particularly older villas.
Thailand: Flooding
The 2011 Thailand floods — among the most costly natural disasters in history — inundated large parts of central Thailand including industrial estates and parts of Bangkok, disrupting global supply chains. Coastal areas in Thailand also face storm surge and sea level risk over the longer term.
Due diligence: For Bangkok investments, check the specific location's drainage zone and elevation. Elevated units in high-floor condominiums are significantly less exposed than ground-floor or low-floor units in flood-prone areas. Phuket and coastal resorts face different risks: storm surge rather than river flooding.
Egypt: Heat Stress and Sea Level
Egypt faces multiple climate stressors:
Heat stress — Cairo and the New Administrative Capital already experience extreme summer temperatures. MENA (Middle East and North Africa) is warming at roughly twice the global average rate. Long-term habitability risk in extreme heat scenarios is a consideration for multi-decade holders.
Coastal sea level risk — Alexandria, Egypt's second city and a growing property investment location, is one of the world's most exposed cities to sea level rise. Parts of the city sit below current sea level, protected by infrastructure. This is a long-term risk factor for Alexandria coastal property.
Due diligence: For investment properties in Alexandria, check proximity to sea level and flood zone status. For New Administrative Capital, the desert-city context means heat stress resilience of the building (insulation, cooling) is a relevant factor for rental yield sustainability.
UAE (Dubai): Heat Stress and Coastal Exposure
Dubai already experiences summer temperatures regularly exceeding 40°C and wet-bulb temperatures at the upper end of human tolerance. This limits outdoor activity significantly in summer months. For tourism-driven property returns, summer occupancy is structurally lower as a result.
Long-term sea level — Dubai Marina, the Palm Jumeirah, and other coastal and reclaimed developments carry theoretical long-term sea level exposure. As of 2026, this is a multi-decade concern rather than an immediate pricing risk, and the UAE has substantial capital to invest in coastal protection infrastructure.
Due diligence: Sea level risk is not a primary concern for typical investment hold periods in Dubai. Heat stress is already factored into the market's seasonal demand patterns. Focus on air conditioning specification and energy efficiency of the building.
Cyprus: Water Scarcity
Cyprus is one of the most water-stressed countries in Europe. Chronic water shortage has driven significant desalination investment (approximately 60–70% of potable water on the island now comes from desalination). Water costs are therefore embedded into the cost of living and property ownership more than in most European markets.
Due diligence: For larger villas with pools, water supply costs are a relevant ongoing expense. Check whether the property has access to a water supply agreement and what desalination-dependent costs are expected to be over the medium term.
Transition Risks: EPC and Energy Efficiency
Beyond physical risks, property investors — particularly in the UK — face transition risks related to energy efficiency regulations:
UK: Proposals to require EPC Band C for new tenancies (previously planned for 2025 onwards; subject to ongoing policy review as of 2026) would require significant capital expenditure on older properties with poor energy ratings. Pre-1980s UK properties outside London often have EPCs in the E, F or G range.
EU markets (Spain, Cyprus, Greece): Energy Performance Certificates are required for property sales and lets across the EU. Increasingly stringent efficiency standards under the Energy Performance of Buildings Directive (EPBD) will require phased upgrades to the worst-performing properties over the coming decade.
Due diligence: For any property purchase, check the current energy performance rating and estimate the cost of upgrading to the likely required standard. Factor this into your acquisition cost.
A Practical Climate Risk Checklist
Before completing any overseas property purchase:
- Check flood zone status (UK: Environment Agency; Spain: SNCZI; EU: local planning authority)
- Check wildfire zone designation (Spain, Greece: municipal / Cadastre records)
- Research earthquake and volcanic activity risk for the specific location (Bali, Thailand)
- Obtain insurance quotes — premium levels signal how insurers assess the specific location
- Review the EPC/energy certificate and estimate upgrade costs to current/future standards
- For coastal properties: check elevation and proximity to sea level for longer hold periods
- Ask whether the building design and specification is adapted for the local climate (cooling, insulation, drainage)
Related Guides
- Emerging vs Established Property Markets
- Buying Property in Spain: A Complete Guide for Foreign Investors
- Buying Property in Bali: What Every Foreign Investor Must Know
- Interest Rates and Global Property Cycles in 2026
How Global Investments Can Help
Climate risk due diligence requires local knowledge as well as general awareness. Our teams across all eight markets can advise on location-specific risks, help you access the correct regulatory maps and databases, and provide introductions to specialist insurers where standard cover is unavailable.
We also take a long-term view of our clients' portfolios — including identifying where climate trends may materially affect values over the intended hold period. This kind of forward-looking analysis is increasingly important, and it is the kind of honest advice we believe international investors deserve.
This guide is for general educational purposes. Climate science and property risk assessments continue to evolve. Insurance availability and premiums change. Always seek current, location-specific advice before completing any property purchase. Property values and rental income are not guaranteed and can fall as well as rise.
Frequently asked questions
Does climate risk actually affect property prices today, or is it only a future concern?
Climate risk is already affecting prices and insurability in specific locations. UK flood-zone properties face sharply higher insurance premiums and, in some areas, inability to obtain flood insurance at any price. Spanish coastal properties in wildfire-prone zones are experiencing rising insurance costs and some face building moratoria. These are present-day financial impacts, not theoretical future ones.
How do I check whether a UK property is in a flood zone?
The Environment Agency's Long Term Flood Risk Assessment tool (check.longterm.flood.risk.service.gov.uk) allows you to check any UK address for flood risk from rivers, the sea, surface water and groundwater. Flood Zone 3 (high risk) and properties within existing flood zones should be assessed very carefully, including checking the availability and cost of flood insurance.
Is the Palm Jumeirah in Dubai at risk from sea level rise?
Over a long time horizon, low-lying coastal developments including parts of Dubai Marina and the Palm Jumeirah carry theoretical sea level rise exposure. As of 2026, this is a multi-decade rather than near-term concern, and the UAE has significant infrastructure investment capacity. It is a factor for very long-term holders but is not the primary climate risk consideration for most investors in Dubai — heat stress and water scarcity are more immediate.
Are properties in wildfire-prone areas of Spain becoming uninsurable?
Some properties in higher-risk wildfire zones — particularly rural properties in Andalucía, the Canary Islands and parts of Valencia — are experiencing significantly higher insurance premiums, and a small number of insurers have withdrawn from offering cover in specific zones. This is a developing situation and varies significantly by exact location. Always obtain insurance quotes before completing a purchase in fire-prone areas.
How should climate risk factor into my investment decision?
It should be part of standard due diligence, not an afterthought. Check flood zone status, wildfire zone designation, and insurance availability and cost before committing. For longer-hold investments (10+ years), consider how climate trends are likely to affect the desirability and insurability of the location. Coastal and riverside locations warrant additional scrutiny.
This guide is for general information only and does not constitute financial, legal or tax advice. Programme rules, prices and tax rates change; verify current requirements with a qualified adviser before acting.