Bushfires, floods and cyclones have all damaged Australian properties in recent years. Should investors avoid these disaster-prone suburbs or get in while the price is low?


Professor Chris Eves from the Queensland University of Technology specialises in property economics and has studied the effects of natural disasters on property markets.


Eves says that after a heavy fire, there is always an immediate and significant effect on property prices. He believes this is different from other natural disasters such as floods, which tend to lose their major visual indicators of damage after a couple of weeks. 


“With a bushfire and particularly when we are talking about areas like the Blue Mountains (NSW) which is predominately timbered, that visual reminder can remain for up to two or three years,” he says.


“And there is also a link between the amount of media coverage an area gets and the impact on values.”


Interestingly, Eves’ research also found that loss of life through bushfires had more of an impact on a suburb’s median home prices than loss of property.


Thinking twice before buying


Despite the Blue Mountains bushfires last year predominately affecting suburbs such as Springwood, Blackheath and Winmalee, Eves says that the incident will increase the chances of people hesitating before buying not just in those suburbs, but anywhere in the region.


“People might say: ‘Well Winmalee and Blackheath went up last time. Is Wentworth Falls going to be next?’” he says.


“So it’s in their psyche when they are buying and it’s a negative aspect they will take into consideration when they put an offer in.”


However, he also says that some people may take the opposite view and see it as the perfect time to buy.


“Some buyers may also say: ‘Well, this area has been burnt out already and the chances of it happening again are a lot lower. So some people will see it as an opportunity to get into a market at a lower price than they would if they were trying to get into that market six months earlier,” he says.


Another one of Eves’ interesting findings is that even though renters can easily vacate a damaged property, they will often move in to another house nearby because their family, friends and schools are in the vicinity. And that applies no matter where the fire is.


“Even if people are living in Turramurra because they want to be close to Lane Cove National Park or somewhere like that, they still usually look for a place near there because that’s an amenity they put a high value on.”