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How will the 2019-2020 bushfires in New South Wales affect the value of your property?

Devastating bushfires that are sweeping across the nation have caused unimaginable damage burning through millions of hectares of land and thousands of properties, killing millions of animals and many people as well. This destructive natural disaster will without a doubt have its social and economical effects, even when the fires are stopped. 

In this article we will examine the possible future effects on the property market in New South Wales in the aftermath of the fires based on past examples of similar cases here and other developed nations around the world. 

Surprisingly, the results of our analysis revealed that some properties might even see an increase in value following these horrific wildfires.

 
Which properties will likely LOSE value?

A lot of independent studies have been done on this topic and clearly wildfires or other natural disasters have an effect on property prices. Based on such research, there’s a consensus that the highest loss in value is suffered by property located in close proximity with an actual view of a fire scar. 

The value of properties in close proximity, but without a view of a fire scar lose value as well, especially if they are in high-risk level areas (close to the bush or other green flammable areas), however, the prices usually normalize in the next few years. 

According to research and historical examples:

  • Properties with a view to a fire scar might lose 7-10% of its value in the aftermath of a wildfire (and may drop up to 25% in some of the most highly affected areas).
  • Properties in close proximity to wildfires without a fire scar may lose about 3-4% of their value (after the fires are stopped).
  • Prices normalize to pre-fire levels in 1 to 3 years after the disaster with the property market beginning to follow the normal capital growth cycles in affected areas as the infrastructure is being rebuilt. 

 

 
Which properties will likely GAIN value?

Based on a few cases in Australia and the United States, some properties tend to gain value after nearby natural disasters, especially ones that are located in more urbanized areas with less risk of fires. In all of the analyzed cases, however, such spikes in prices are predictably relatively short and property values tend to normalize within about a year after the disaster.

  • Properties in urbanized areas not too close (but also not too far away) from wildfire areas may see an increase in selling prices by up to 6% as people whose homes were destroyed are searching for a new home nearby in areas with less risk of a repeat fire.
  • Such growth in values tends to happen within about 6 to 12 months of stopping the fires. After that, prices typically normalize. 
  • A possible increase in price, however, only happens if constant wildfires do not become/are not a continuous trend in the area.
 

 

Case of 2009 in Queensland, Australia

Researchers, in their study “Impact of wildfires and floods on property values”, discovered that in the aftermath of a natural disaster property values decrease in affected suburbs even if the majority of properties were unaffected by the disaster. What was an interesting discovery was the fact that property prices may actually go up in nearby suburbs that were not affected, but bordering the suburbs that were affected by the fires (however, for a short period of time). The suburbs of Frenchville, Park Avenue and Norman Gardens in Queensland were analyzed in the cited study. 

Frenchville was affected by wildfires in 2009 which clearly had negative affect on property – prices went down by 5% per year for two consecutive years in a row. After a second wildfire hit the suburb in 2012, the property market was affected even more with prices dropping by whopping 12% the following year. On the other hand, the nearby suburb of Norman Gardens, which was not affected by the wildfire in 2009, saw a significant increase property price growth in both 2010 and 2011 (over 4.5% per year). 

This suggests that surrounding areas which are not directly affected by a disaster can expect an increase in prices due to more people considering it as a safer option for their family.

 

Case of 2017 in Sonoma County, USA

A very similar example to the previously mentioned Queensland wildfires was Sonoma County, USA where about 5300 houses were destroyed because of fires in 2017. Just 6 months after the disaster property prices in relatively nearby areas that were not affected by the fires started increasing at a fast pace – over 6% in under 6 months – as most people (some of whom lost their homes due to the fires) started buying property in nearby areas that have less risk of a wildfire.

Furthermore, after the fires, rental prices in suburbs nearby that were not affected by the disaster grew at an even faster pace than sales, because people had to quickly find a place to stay. 

 

Cases between 2000 and 2016 in California, USA

Research conducted in 2018 when analyzing the effects of all wildfires from 2000 to 2016 on property prices in California (Los Angeles, San Diego Basin areas) identified that property values fell between 3-4% the year following each wildfire case for properties located within a 2 kilometre radius to the fires. The impact on prices for properties located within 1 kilometer of the fires and a scenic view of the fire footprint lost an additional 4,5%. 

On the bright side, however, if no repeat wildfires hit the affected areas property prices, in most cases, have rebounded to previous levels within a few years, even if the proximity to the damaged areas was less than 1 kilometer.

 

Cases between 2000 and 2012 in Colorado, USA

A research paper published by McCoy and Walsh, who analyzed data between 2000 and 2012 in the Colorado Front Range, found that properties that were in close proximity to burned areas lost some of their value in the short term, but saw prices rebound to normal levels in 1 to 3 years. They also found that, for properties with scenic views of the damaged areas, it might take a few more years for prices to fully rebound. 

Property prices in nearby locations to burned areas don’t tend to have long lasting negative effects as burned down areas have much less risk of a repeat fire hazard and infrastructure is usually rebuilt after a few years.

 

Conclusion

In all of the analyzed cases, property prices suffer a hit in areas that are very close or have a scenic view of the damage caused by the wildfires. On the other hand, because of the devastating experience of homeowners close to the disaster zone, some families make the decision to remove themselves from the risk of a repeat fire therefore increasing demand for properties in more urbanized areas nearby, which, in turn, increases the demand and prices of such property.

After the 2019-2020 bushfires are stopped in New South Wales, homeowners should expect a very similar property market disruption to the analyzed cases in this article. Furthermore, these effects on the property market have proven to be short term and prices should normalize within 1 to 3 years after the disaster.

However, if such extreme wildfires become more frequent, people from rural areas may be forced to move to more urban areas which could mean a more permanent shift in property prices.

 

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