Nature making waterfront property a liability: Terry Ryder

Many of the time-tested paradigms of real estate are out-dated because markets evolve and situations change.

The old furphy that suburbs closest to the CBD or the beach are the best investments is still repeated by commentators who don't like to clutter up their schedules with inconveniences like research.

The once-upon-a-paradigm that houses show better capital growth than apartments because of the higher land content has been challenged as more buyers opt for attached dwellings in the major cities.

The oft-repeated theory that water is the greatest wealth creator in residential real estate doesn't stand up to scrutiny, either. Water-based property is often the most expensive real estate but research regularly contradicts the notion that it shows superior capital growth.

The idea underpinning the theory of "prime" property showing the best growth rates is that this kind of property is highly desirable and many people aspire to own it. But desirability and aspiration does not translate into demand. Simply, most people don't have the financial resources. They buy where they can afford.

And, in the case of desirability, even that factor is dissipating for water-based real estate. Increasingly around Australia, water frontage is becoming a curse, rather than an asset. There will come a time, not too far distant, when water frontage will render property near worthless - in some locations, at least.

We have witnessed multiple instances of millionaire homes losing their front yards to seaside erosion - on the Gold Coast, at Byron Bay and elsewhere. It's only a matter of time before homes topple into the surf.

One of the great emerging public debates is about who pays - the home owners or the taxpayer?

We are seeing rising numbers of local authorities banning development in at-risk coastal locations, including a significant stretch of Ninety Mile Beach in Victoria.

Home owners fronting Lake Macquarie near Newcastle are currently digesting the suggestion they may have to demolish their homes, because water levels are rising in the tidal lake system.

Along the extensive coast of Australia, the massive forces of nature keep stripping beaches of sand. Councils spend millions to replenish them and then watch helpless as another king tide or storm surge wipes it all away again.

It's not just about the ocean. Riverfront property is becoming a liability as well. The increasing intensity and frequency of major storms means the same locations flood again and again.

This is rendering some locations un-insurable. The insurance companies are refusing to cover some of the most at-risk places. The fashionable response, it seems, is to built levees, but at massive cost.

Again the question arises, who should pay?

There are properties under threat everywhere. A two-year study by the University of New South Wales has been recently published for a 22km strip of coastline around Port Fairy in south-western Victoria. It has found that 270 buildings are under threat of inundation right now, but the number will rise above 400 if sea levels rise 0.8m,  as predicted.

Most at risk is Port Fairy's East Beach, where prestige homes are threatened by erosion and flooding - now, not at some vague point in the future.

Property owners in these and many other areas face considerable loss of value. Increasingly, water frontage will be more a detriment than a bonus, and one of real estate's most dominant paradigms will be turned on its head.