The impact of natural disasters on property prices

As North Queensland continues to grapple with floods, it raises the question of how natural disasters impact property markets.

Ray White Group Chief Economist Nerida Conisbee said the relationship between natural disasters and property values was shaped by factors ranging from demographics to wealth disparities.

Citing research from Siddhant Saha, Ms Conisbee noted that after the 2019-20 Black Summer bushfires in Sydney, properties in bushfire-prone areas in the Hawkesbury experienced price drops of 6% to 24%, while those in the Blue Mountains saw declines of only 0.2% to 0.5%. However, those price drops were only temporary, with most markets recovering within 12-24 months.

“This pattern of short-term impact followed by recovery appears consistent across different types of natural disasters and locations,” she said.

“For example, following the 2011 Brisbane floods, affected suburbs initially saw value declines but by 2017 were achieving median prices well above their pre-flood levels. Similarly, Mallacoota, one of the worst-hit areas in the 2020 bushfires, saw house prices surge 70% in just three years, driven significantly by covid-19-driven population movements to regional areas.”

Ms Conisbee said the speed and extent of recovery often depended on:

• Insurance coverage – Locations with higher rates of insurance coverage tend to recover faster. “This creates a wealth disparity in disaster recovery, with more affluent areas often bouncing back faster,” she said.

• Demographics – Communities with a higher average age tend to be more resilient, as older residents are often more willing to remain in fire-prone areas.

• Government response – “Areas that receive significant government investment in disaster mitigation infrastructure typically see stronger price recoveries,” she said.
• Location desirability – Riverside properties, coastal homes and bush retreats often continue to command premium prices, despite their risky locations.

“Short-term price impacts from disasters typically recover, but the timeline can vary significantly by location and circumstances,” Ms Conisbee said.

“Demographic and wealth factors play crucial roles in market resilience, creating uneven recovery patterns across different communities.”