Prices will fluctuate in bushfire affected areas.
Property prices in bushfire affected areas are set to fluctuate considerably as communities and families try to get back to normal after the devastation of recent fires.
RiskWise Property Research has identified three ‘severity’ categories which will impact on property prices: suburbs where homes or infrastructure were destroyed; suburbs where homes were under threat and/or evacuations were undertaken; and suburbs where alerts/warnings were given regarding potential escalation in the recent bushfires.
But they also warn that there is a big, new variable in all of this, and that is the potential for repeats of the recent bushfire season. Many people are concerned that the fires were not a one-off event and people don’t want to risk their lives or those of their family. If there are more major bushfires in the next few years, this is highly likely to have a sustained impact not only currently impacted areas but also on many areas that carry bushfires risk.
RiskWise CEO Doron Peleg says the impact would depend on the state of the property market in the suburb before the bushfires and what category the suburb fell under.
Doron says: “Existing weak markets with no demand drivers or those that don’t have the right fundamentals for growth could be hit by 10-20% reductions as a conservative estimate. And this impact will last at least a couple of years depending on the restoration of the area – even three five years if these are repeatable events.”
He adds that the impact on property prices depends on the actual effect of the bushfires, adding that the stronger the property market, the lower the impact on dwelling prices.
“In the short term (at least a couple of years), it is highly likely there will be price reductions and significantly reduced demand for areas in Category 1 and for weak markets in Category 2. Buyers are likely to negotiate hard and require major discounts to reflect the risk of additional bushfires in the future and that it will potentially be harder for them to sell their properties down the track.”
He said the results were similar to what RiskWise saw following the 2009 Black Saturday Victoria Bushfires.
The extent of the damage has been catastrophic with 2,779 homes lost (as of 14 January 2020) and more than 2,300 suburbs impacted so far.
The Insurance Council of Australia has raised bushfire claims figure to $1.34 billion and claims across the industry have risen to over 13,750.
