What happens to property prices after major storms and natural disasters?
With recent storms in the Sydney, Central Coast and Hunter Regions of NSW it would be a good time to look at how major storms and in particular natural disasters affect property prices.
The most recent storm is unlikely to have a major - if any - effect on property prices particularly in the Sydney market. However other areas that have seen major storms or natural disasters have not only a short term effect with insurance claims and the need for repairs and rebuilds, but also longer term repercussions that come from natural disasters. Australia’s weather is quite unpredictable, which leaves areas unable to forecast the effects that come from these terrible disasters.
The most recent major disaster we have seen was earlier in February 2015 with Cyclone Marcia which hit the Queensland region. Immediate effects of the disaster saw an increase in rental demand in areas most hit by the storm like suburbs of Rockhampton. Residents who had lost their homes or had major damage to their homes needed to relocate while they tried to find a more permanent new home or fix the damage to their existing home.
After Cyclone Yasi in early 2011, various areas of Queensland saw their local property markets take a hit. RPA Data figures released in 2013 showed that prices in one of the worst hit areas of Innisfail fell below $200,000 in the months following the cyclone hit. These prices increased to above $250,000 and stabilised in the following 12 months according to the same data.
The larger city of Townsville saw a drop of almost 3% on the median house prices in the first quarter of 2011, when the cyclone hit. This was following a rise in the median price of 4.1% in the previous quarter at the end of 2010, according to the Real Estate Institute of Queensland.
On the other end of Australia’s extreme and unpredictable weather is the 2013 bushfires that destroyed more than 100,000 hectares of land in New South Wales’ Blue Mountains region. Professor Chris Eves from the Queensland University of Technology, who specialises in property economics, was quoted at the time as having the opinion that the effect of bushfires is drastically different to that of other disasters.
It doesn’t seem to just be values that are affected by the media coverage of these disasters, with agents in the Blue Mountains area having to postpone auctions scheduled for the period during the recovery. Real estate agents of the area at the time were quoted saying that many people from outside the area believed the highways were closed and therefore didn’t travel to the area even if they had the intention to purchase. Quiet periods in the Blue Mountains area after previous bushfires lasted approximately 12 months.
With the growing unpredictability of Australia’s weather and many new records for storms and other natural disasters being set every year how can the property and insurance markets as well as the consumers prepare for the unforeseeable. The first step would be to get as much protection for the biggest asset you will ever own - your home. You can search on our site for some advice on home insurance as well as comparing insurers to see who might best suit your needs.