There's a property programme called Location, Location, Location. The title is correct. Where your house is, is far more important than its physical characteristics. You clearly wouldn't want to buy your home near a volcano (Iceland or otherwise), but I think the flood risk is far greater. Homes that were severely damaged by floods during the recent storm Xynthia in France and are no longer habitable are being bought by the government and destroyed. Sarkozy says "we will not let people move back into homes situated in areas where there is a life-threatening risk". The risk has been heavy for farmers too. 45,000 hectares of arable land were flooded and crops burned by salt in the Vendee and Charente-Maritime areas alone. Coupled with all this is the state of crumbling sea defences around the world.
So, why do people still dream of that home 'by the sea'? Why are house prices still so expensive in coastal areas and on tiny islands? To my mind, these should be the cheapest. House prices are supposed to be market-driven, but are too slow to change. Also important is the ease/speed of broadband connection in this internet world. We were able to buy our modest home with super-fast broadband connection and well away from the sea at a ridiculously cheap price. That's why we're here.