Bushfires expected to have major short-term impacts on property prices
According to a recent report by RiskWise Property Research, the ongoing bushfire crisis could have major short term impacts on property prices across Australia.
As the report suggests, just how deeply affected a particular area, suburb or town has been by the fires, how strong or weak the property market was before and how close it is to infrastructure could determine how hard its housing market is hit.
RiskWise CEO Doron Peleg said, “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.”
So if you’re looking to take out a home loan in the next few months or even the next year, you might want to read on.
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Which property markets will be affected most by the bushfire crisis?
In the report, RiskWise breaks down the level of impact on property values into three categories. So depending on which category your home or area fits into, you may feel the economic effects of the current bushfire devastation more or less in the future.
High impact
This includes the 152 suburbs that have been most severely impacted by the bushfire crisis - where homes and infrastructure have been destroyed. Depending on how strong or weak the housing market was before the fires, property prices for areas severely affected could decrease by as much as 20%.
Medium impact
This covers the 537 suburbs where homes have been considered under threat and/or been evacuated. Peleg added, “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.”
Lower impact
Property prices in the 1,654 suburbs where alerts/warnings were issued as a precautionary measure may still be impacted, but perhaps not as much as areas where homes and businesses were destroyed. Depending on how popular the area was before the bushfires, properties in lower impacted areas may have experienced a 5% increase in value, but with the the environmental threat may only increase by 1% to 3% in value.
Peleg predicted that “this impact will last at least a couple of years, depending on the restoration of the area - even three to five years if these are repeatable events.”
In areas most affected by the bushfires, rental prices could also be pushed up as demand rises, though property investors may be less keen to on new investments in these areas. While property values are likely to decrease, home insurance premiums will likely increase as there may be risk of more bushfires in the future.
How many properties have been affected by the bushfires?
According to multiple news sources, the number of homes destroyed in the fires include: over 2,000 in New South Wales alone, nearly 400 in Victoria, 151 in South Australia and 48 in Queensland. Plus five homes in the Northern Territory, two homes in Tasmania and one home in Western Australia where mostly bushland has been affected.
In a recent report, Moody’s Analytics predicted that economic damage caused by the bushfires could quite easily be much more than the $4.4 billion worth of damages caused by the 2009 Black Saturday fires in Victoria, where 450,000 hectares of land was burned. Over 10 million hectares are thought to have been destroyed in the current bushfire crisis.
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What if I’m looking to buy a home now or in the near future?
With the current ongoing fires in mind and the Bureau of Meteorology predicting an increase in the severity of bushfire weather conditions in the future, choosing where you buy your home is an important factor to take into consideration.
Plus if you are thinking about taking out a home loan, then you should be aware that, should your home be affected by a natural disaster, you will still have to pay off your mortgage. This is why home loan lenders require you to take out home insurance.
And on the subject of home insurance, if you’re looking to buy close to a national park or in a town/suburb affected by the bushfires, not only will insurance premiums be higher, but you’ll also want to make sure you get the right level of cover. You can check out our comprehensive home insurance guide for more tips on what to look out for when searching for a home insurance policy.
With that in mind, if you already have a high insurance premium to deal with, you might want to counterbalance that expense with a good home loan deal. You can compare offers available right now at Mozo’s home loans comparison page.