How fires and floods impact Australian property prices

As wildfires continue to ravage California and the clean up begins for recently scorched area near the Grampians National Park, factors like demographics, government response, location desirability and insurance coverage will all play a role in how real estate markets are affected.

Although Mallacoota in Victoria was one of the worst-hit spots when bushfires broke out across the state in 2020, research by University of New South Wales student Siddhant Saha revealed that house prices surged by 70% in just three years.

Similarly, after the 2011 Brisbane floods, suburbs impacted by the disaster experienced median price rises well above pre-flood levels.

Property prices in areas impacted by the 2019-2020 Black Summer bushfires in Sydney fell by 6-24%, but this decline was only temporary, with most areas bouncing back after 12-24 months.

Ray White chief economist Nerida Conisbee said the data suggested buyers weren’t considering long-term climate risks enough when purchasing a home.

Ray White chief economist Nerida Conisbee said they still saw a demand for people to live in areas prone to natural disasters. Picture: News Corp Australia

She added that how a government of an area responded to a natural disaster — like flooding or bushfires — determined how much its property market would be influenced.

“Making it less likely to be hit by natural disasters would be one thing,” she said.

“Alternatively, just rebuilding in a much better way can have a huge impact.”

Ms Conisbee said there was still a big drive for people to want to live in areas prone to bush fires and flooding, showing they didn’t seem to be impacted by rising insurance premiums.

“There (will) probably be some tipping point at which it does become just far too expensive to live in some of these areas,” she said.

Climate Valuation data shows that in areas where more than 80% of properties are at a high risk of being uninsurable for flooding, most still experienced above average price growth in the last five years.

This comes after fires scorched more than 76,000ha of land across 21 days in the Grampians region in December-January.

But Harcourts Horsham principal Mark Clyne believed home prices wouldn’t be affected much as most people who already lived in the region were aware of the fire risk.

“People embrace it and move forward, and others just put their place on the market and sell it if they get the insurance money,” Mr Clyne said.

He said the recent fires could deter some people from buying in the area but people would move on after time had passed.

“Every few weeks you hear of someone attacked by a shark or killed by a shark … for a week or two, there’s no-one in the water. After a few months, everyone’s back in the water as per normal,” he said.

This article first appeared on realestate.com.au and has been republished with permission.