Australians may be accustomed to bushfires and floods, but more of us can now add cyclones to the ledger.

As communities continue to mop up from the fallout from Cyclone Alfred, it’s worth asking how these worsening natural disasters affect the property market – and if our homes can withstand the strain?

Ray White chief economist Nerida Conisbee said the relationship between natural disasters and property values was more nuanced than many might expect, shaped by factors ranging from demographics to wealth disparities.

“What happens to property markets when disasters strike? The impact is complex and often counterintuitive,” she said.

Research from University of NSW student Siddhant Saha found that property prices usually drop after a natural disaster. But they bounce back surprisingly quickly – between one and three years.

Take Mallacoota in Victoria, which was one of the hardest-hit spots in the 2019-2020 Black Summer bushfires. Saha found that house prices surged by 70 per cent in just three years after the disaster.

In Sydney, he found prices dropped for properties in bushfire-prone areas such as the Hawkesbury by 6-24 per cent, while the Blue Mountains had smaller declines of 0.2-5.2 per cent.

However, these impacts were temporary, with most markets recovering within 12 to 24 months.

Conisbee said that pattern of short-term impact followed by recovery appeared consistent across different types of natural disasters and locations.

After the 2011 Brisbane floods, there were initial declines in affected suburbs. But, by 2017, they were back at median prices well above their pre-flood levels.

House prices bounced back in Mallacoota within three years of the Black Saturday disaster. Photo: ABC

How quickly will a market recover?

Conisbee said the speed and extent of recovery was dependent on several key factors.

The first is insurance coverage: Areas with higher rates of insurance coverage tend to recover more quickly, as residents have the financial means to rebuild.

This creates a wealth disparity in disaster recovery, with more affluent areas often bouncing back faster.

Second, demographics also had a role in market resilience. Research suggests older residents are often more willing to remain in fire-prone areas, potentially due to stronger community ties and longer-term property ownership.

Then there is the government response: Areas that receive significant government investment in disaster mitigation infrastructure typically have stronger price recoveries. This includes flood levees, fire breaks, and improved emergency response capabilities.

Finally, there is the desirability of a location. Conisbee said many high-risk areas continued to command premium prices despite the threats they faced.

Riverside properties, coastal homes, and bush retreats often maintain their appeal due to lifestyle benefits that, for many buyers, outweigh the risks.

Preparing for it

It’s important then, for the National Construction Code to be regularly updated to take changing weather patterns into consideration.

“With cyclones moving further south, more homes than ever are at risk – not just in places like Townsville and Cairns, but now in south-east Queensland and northern NSW. This shift makes it critical that homes across Australia are built to withstand these changing conditions,” Green Building Council of Australia chief executive Davina Rooney said.

“While Australia has strong building codes, they must continue evolving to reflect the reality that extreme weather is impacting more communities. Regular updates to the National Construction Code are essential to ensure homes are more resilient, reducing disaster recovery costs and better protecting people.”

CoreLogic banking and finance solutions head Tom Coad agreed updating and enforcing building codes was more important than ever. But he said older homes should also be retrofitted for resilience.

“While newer buildings constructed under the latest codes have shown resilience, the majority of existing structures may not meet these enhanced standards,” he said.

“The lag in adopting and enforcing updated building codes across different regions, coupled with the financial and logistical challenges of retrofitting older buildings, contributes to this gap.”

Making sure older buildings can withstand the storms and fires is also crucial. Photo: AAP

What lies ahead

Recent Climate Valuation data shows that even in areas where more than 80 per cent of properties are at high risk of being uninsurable for flooding, most still had above-average price growth over the past five years.

“This suggests buyers may be underweighting long-term climate risks in their purchase decisions,” Conisbee said.

However, Australia is a varied market, and some regions are more affected than others.

“Queensland, for instance, has shown more price sensitivity to flood risk, possibly due to repeated major flooding events creating greater risk awareness among buyers,” she said.

“This regional variation suggests that frequent exposure to disasters may eventually influence buyer behaviour more significantly than isolated events.”

Coad said public awareness was key in a multifaceted approach to facing natural disasters.

“Public awareness campaigns can educate homeowners on the importance of making their properties more disaster-resistant,” he said.

“Financial incentives and support from the government can also play a crucial role in encouraging homeowners to undertake necessary upgrades.”

The aftermath of Cyclone Alfred in south-east Queensland has highlighted another issue: The role of insurance markets on buyer behaviour.

“As insurance premiums rise in high-risk areas, property markets face new pressures,” Conisbee said.

She said homes with features that reduced insurance costs may begin to fetch premium prices, while values could dip for properties facing insurance challenges.

“As climate-related risks continue to evolve, property markets will likely become more sophisticated in pricing these risks. However, the enduring appeal of high-risk locations suggests that lifestyle factors will continue to compete with safety considerations in driving property values,” Conisbee said.

“The challenge for buyers and policymakers alike will be finding ways to balance these competing forces while ensuring community resilience in the face of increasing natural disaster risks.”

This article first appeared on View.com.au. Read the original here