UK property sector tries to rise above flood risks

LONDON, Feb 2 (Reuters) London's property developers and insurers will have to grapple with rising sea levels and growing flood risks if the findings of an influential UN climate change report today are anything to go by.

The study will project a ''best estimate'' that temperatures will rise by 3 Celsius (5.4 Fahrenheit) by 2100 and predicts sea level rising 28 to 43 cm this century, after a 17 cm rise in the last century.

The British-commissioned Stern Review says a rise of just 2C could lead to a potential irreversible melt of the Greenland ice sheet and an eventual 7 metre sea level rise.

Rising sea levels threaten low-lying areas such as Bangladesh, Florida and the Netherlands, and cities including New York and Tokyo, as well as Europe's financial hub London.

London's Thames estuary is vulnerable because of its susceptibility to tidal surges in extreme weather and because the southeast of England is slowly sinking.

Britain's Environment Agency says the high tide in central London is rising by about 75 cm per century.

The level of flood insurance cannot be taken for granted and there remains a suspicion that any future flood damage might prompt insurers to re-assess the costs to their businesses.

''If we are going to get more properties vulnerable to more extreme weather than that is going to bring the issue of flood risk into sharp focus,'' said Malcolm Tarling, a spokesman for the Association of British Insurers.

The group has estimated that climate change could increase British fluvial and coastal flood risk by a factor of 8 to 12.

THAMES GATEWAY Europe's largest redevelopment project -- Thames Gateway -- will see 160,000 new homes built in a flood-prone area stretching east from the London 2012 Olympics site to the mouth of the River Thames.

Land Securities, Europe's biggest listed property company and the biggest player in the Thames Gateway development, says it will raise ground levels to meet the Environment Agency's flood protection requirements where necessary.

But the company's chief executive Francis Salway said shareholders had nothing to fear because most of the company's landholdings were on higher ground ''The majority of our (Thames Gateway) land holdings are positioned at a reasonably high level with the major land area being above the chalk spine running parallel to and inland from the River Thames,'' Salway said.

Flood risk had also been incorporated into its development designs. ''We do not envisage that purchasers of the houses being built will have any difficulty in obtaining appropriate insurance,'' Salway said.

UNDERGROUND The Environment Agency estimates that half a million properties, housing 1.25 million people and with a total value of 80 billion pounds (156.3 billion dollar), are on the Thames floodplain, along with an airport, 30 railway stations, much of the central London underground system, and eight power stations.

And because demand for affordable housing in the region is booming while supply is severely constricted, that exposure is set to grow.

''It is difficult to measure what kind of alleviation schemes may be required in future as sea levels rise, but we have to take a measured approach towards what is known and what can be predicted,'' Faraz Baber, head of planning, development and regeneration at the British Property Federation, said.

''It comes down to what the market will accept; if those alleviation schemes are not suitable then the insurance industry will move away from it.'' In most cases, it is impossible to get a mortgage loan on a property without buildings insurance, which in Britain -- unlike other countries -- covers homes and businesses against flooding as standard. British home insurance in the more flood-risk areas also do not yet reflect the true premium their risk warrants.

''At the moment we have an agreement with the government in that we offer flood insurance on conditions,'' Tarling said.

Those conditions include investment in Britain's flood defences and an adequate planning system so that houses are not built where there was a high flood risk.

Britain's government has so far kept up its end of the bargain, Tarling said, citing stringent new planning guidelines published in December.

Salway said he believed a major government review would raise the overall level of protection afforded by London's Thames Barrier by 1.2 metres to 7.7 metres above ordnance datum -- a measure of mean sea level.

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