The impact of recent natural disasters on the property market

In many cases property is one of the worst casualties of a natural disaster, following loss to human life.  Damage is done very quickly and with little warning, and people can be left homeless or even in situations where the destruction is so bad that rebuilding is an almost impossible feat. 

Although we are only in May, 2011 has already seen a multitude of natural disasters hit the globe, with the Southern Hemisphere suffering particularly badly.  In Australia, both Queensland and Victoria have seen flooding, with Queensland suffering a double hit from Cyclone Yasi.  Our easterly neighbours in Christchurch were also dealt a blow when the city was hit by a magnitude 6.3 earthquake in February, which destroyed homes, heritage buildings and office blocks.

So what impact can we expect such disasters to have on property markets over the longer term? As well affecting physical property, natural disasters can have wide reaching effects on markets both specific to the area affected, as well as generally.   

In an article entitled ‘Nature calls the shots’ which appeared in the March 2011 issue of the magazine Smart Property Investment, the chief economist of AMP, Shane Oliver, predicted that the combined impact of the Queensland floods and Cyclone Yasi will add to inflation across the March and June quarters.  He also wrote that the Federal Government’s response of sourcing rebuilding funds from a temporary levy on taxpayers will not help consumer spending.

Such conflicting results will have an impact on the Reserve Bank of Australia’s interest rate decisions over the next couple of months.  These decisions will affect all mortgage holders around Australia, regardless of whether they are in flood/cyclone affected areas or not. 

The same issue of the magazine sees CENTURY 21’s own Chairman, Charles Tarbey, comment on the future of the Queensland property market following the floods.  Charles believes that transaction levels in Queensland will remain low initially, as sellers repair the damage to their properties and hold off from entering the market until they feel they can achieve their desired price.  He went on to say that he anticipates a mini-boom in the Queensland property market once the rebuilding and cleaning efforts start to make substantial progress.

Moving across to Christchurch, the changes that will take place in the property market as a result of the devastation that the earthquake has caused should change the landscape of the city forever.  New Zealand Prime Minister John Key said in March that about 10,000 houses would have to be demolished, with a number of parts of the city abandoned all together, as some areas of land damage cannot be remediated.  Thus, as a result, I suspect we could see rebuilding efforts begin in other locations – with entirely new communities emerging, quite possibly along with different, adapted building styles.  
From what has already occurred this year, I can only hope that we have seen the worst of natural disasters for 2011 and in fact for many years to come.  I wish all disaster affected areas in both the Southern Hemisphere as well as around the world a speedy and efficient recovery process. 

Posted by Charles Tarbey on 02/05/2011 at 1:04 PM | Categories:


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