Floods, fires and the hip pocket: How natural disasters hit real estate values

The aftermath of Cyclone Yasi in 2011. Even after the damage is repaired, what happens to property values?

The aftermath of Cyclone Yasi in 2011. Even after the damage is repaired, what happens to property values? Photo: Getty

Natural disasters – cyclones, bushfires and floods – have long been a hallmark of the Australian landscape.

But the effects of climate change, and some recent disasters, are certainly making us all more aware that the plot of land on which we live can’t be taken for granted.

The effect of such natural disasters on property prices is well-researched in Australia. When Cyclone Yasi hit Queensland in 2011, there was an immediate 3 per cent drop in the median dwelling price in Townsville in the following three months.

Further south, houses affected by the devastating 2011 floods in Ipswich are said to still be worth $150,000 less than they might otherwise be.


The clean-up begins after the Ipswich floods in 2011. Photo: Getty

Generally, however, the short-term effects on property prices tend to be worse after fires than floods. The visible impact of a flood can be gone in a few weeks, while burnt bush can take years to recover, acting as a visual reminder all the while.

If there have been fatalities, the consequences can last much longer as a region is traumatised. Lengthy legal processes and associated media attention will also reinforce negative associations.

But as time goes on, buyers and sellers often seem to forget the dangers – or, perhaps, hope that lightning won’t strike twice – and the market rolls on, reacting to the usual economic forces.

The most devastating natural disaster in Australia in recent memory was Black Saturday – the 2009 bushfires killed 173 people and destroyed more than 2000 houses in Victoria, mostly north-east of Melbourne.


The Black Saturday bushfires took an enormous toll on Victoria. Photo: AAP

The fires also left 7500 people without homes. The resulting shortage of housing and price turbulence took “a good four to five years” to ease, says Donna King, from Mason White McDougall Real Estate in Kinglake.

Nine years later, Kinglake’s median price ($450,000) is catching up to nearby Whittlesea ($465,000) – which is closer to Melbourne and, before Black Saturday, was twice as expensive as Kinglake.

King thinks this is because Melbourne’s suburban sprawl has reached Whittlesea. That means Kinglake’s larger blocks and semi-rural atmosphere has its own new appeal for some.

“The feedback we get is that people build their dream home on a block down in Mernda and, after hearing their neighbours’ toilets flush, they want to move up here where the longer commute is worth it,’’ King says.

In other words, a decision to buy (or not to) into an area seems to have little to do with the natural disaster that hit it.

Another fire-hit area is the Victorian holiday hamlet of Wye River. About half of the community’s 250 houses were destroyed in a bushfire on Christmas Day 2015. Fortunately, there were no fatalities.

Property sales have always been slow and few at Wye River, which is 15 minutes down the Great Ocean Road from popular Lorne. There are only about 10 listings in the area now – before the fire, there might have been twice that.

But agent Grant Powell, the principal at Smyth Real Estate in Lorne, says prices haven’t moved much.

“It (the fire) hasn’t generated a huge amount of selling,” he say. “Most people have held on to their land.”

Wye River is an expensive place to build, partly due to fire authority regulations. But most owners are staying put because they like the area.

On Powell’s books is one house that was for sale before the Christmas Day blaze. Its asking price has remained steady at $850,000-$880,000.

If house prices are a measure of national character, maybe this kind of steady-as-it-goes approach proves that Australians simply take natural disasters in their stride.

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