As Southeast Asia grapples with enhancing the climate vulnerabilities of its cities, the urgency of embedding sustainability across all sectors becomes increasingly apparent. Faced with rising urban temperatures and escalating flood vulnerabilities, the property industry and its stakeholders find themselves at the frontline of climate change.
This position is explored in a report released today (July 7) by PropertyGuru Group. The report underscores the potential of the property industry to foster climate resilience through innovative sustainable solutions, charting a course towards a greener future. While sustainability is important, driving ESG has become a new government focus. Therefore, Real Estate players might find it challenging to balance their ESG goals with their commercial goals.
Employing DataSense, PropertyGuru’s advanced market data and analytics platform, the report examined multifaceted issues within the sector – from the impact of flood risks on property values to the advantages of green building certification, and even the untapped potential of solar energy integration in property developments. It emphasised the urgent need for industry executives and policymakers to strike an effective balance between financial viability and climate change risks to lay the foundation for a resilient, sustainable future for real estate.
Dr. Lee Nai Jia, Head of Real Estate Intelligence Unit said, “Climate change presents a two-fold challenge to the real estate industry, with both physical and financial implications. The gravity of adopting sustainable strategies in real estate has never been felt more profoundly. It is of utmost importance that we accurately account for the environmental costs and benefits linked with our economic activities. Only then can we effectively prioritise and map out our strategies for sustainable initiatives.”
Some of the key findings and implications from the report include:
- Flood Risk Impact: In Malaysia, overall losses due to floods amounted to RM 6.1 billion in 2021, with damage to living quarters accounting for RM 1.6 billion. Based on an examination of flood risk zones and changes to property prices, there is compelling evidence that flood risks are insufficiently factored into housing prices, potentially exposing both developers and buyers to significant financial and physical risks. Despite these challenges, developers can turn this into an opportunity by adopting proactive flood mitigation strategies, thus safeguarding their investments, and enhancing the long-term value of their properties. Such measures range from sophisticated climate risk modelling for site selection to the integration of flood-resilient features in property designs.
- Importance of Green Building Certification: There is a crucial role for green building certification, like Singapore’s Green Mark scheme, in reducing energy consumption and enhancing a property’s market value. Certified buildings were found to be sold at a premium, demonstrating the tangible economic benefits of sustainable building practices to developers and investors. The challenges developers face however include higher upfront costs and evolving consumer preferences, which can be mitigated by aiming for higher certification tiers, leveraging green financing options, and bundling eco-friendly measures with other desirable features.
- Solar Energy’s Potential: The immense potential of integrating solar energy into developments is underscored, particularly the importance of strategic location planning for optimal solar panel performance. While initial costs can be high, the report notes the challenge of making solar technology accessible to all income groups, as solar energy integration is often bundled with luxury properties. Developers could thus broaden solar energy’s accessibility by adjusting their bundling strategies, partnering with banks for panel financing, and collaborating with government bodies to incentivise solar energy usage, thus promoting sustainability on a larger scale.
In a dynamic shift towards sustainable urban development, the real estate sector must pivot to a myriad of innovative strategies to combat climate change.
Dr. Lee added that these strategies not only bolster the environmental credentials of developments but also leads to long-term savings for property owners, heightening the overall appeal and market value of their properties. An essential aspect of this lies in accurately gauging the environmental costs and benefits tied to real estate development activities, which are instrumental in prioritising and executing sustainable initiatives.
Sustainability initiatives, while primarily contributing to long-term environmental benefits, also have the potential to deliver immediate advantages for end-users, including reduced energy expenses and improved living conditions.
Astute management of initial investment and operational costs are thus critical, to manage the symbiosis between commercial success and environmental responsibility in the property sector.
Dr. Lee said, “In line with global movements like the Net Zero Coalition, the United Nations Sustainable Development Goals (SDGs), and local initiatives such as the sustainability-related tax incentives rolled out by the Malaysian government, it’s vital for the real estate industry to align strategies. We need to mitigate the environmental impacts linked to real estate development and the financial risks posed by climate change as these risks can range from devaluation of assets to increased operational costs.
“Creating this alignment is a vital step in building a resilient and sustainable real estate industry – an industry that’s capable of not only surviving but thriving amidst global environmental challenges.”
