The Impact of Natural Disasters on Residential Property Values

Over the past ten years various residential property markets throughout Australia in general and NSW in particular have been subject to substantial natural disasters. These occurrences have included floods, bushfires and hailstorms. In extreme cases the actual rectification costs have been up to AUD$1.5 billion, which occurred with the severe hailstorm in Sydney in April 1999 and cyclone Tracey in Darwin in 1974. Natural disasters such as severe storms and hailstorms have tended to be very indiscriminate in relation to frequency and the actual location of damage, whereas the nature of bushfire and flooding tends to be more defined. Although these extreme natural disasters tend to be infrequent, occurrences of floods and bushfires in residential property areas are more frequent, particularly as urban sprawl encroaches closer to national Parks, State recreation Parks and State forests. Considerable work has been carried out on flood effects on property markets by Bell (1999), Donnelly (1988), McClusky and Rausser (2001), Skrantz and Strickland (1987) in the US, and Chou and Shih (2001) in Taiwan. Fibbens (1994), Lambley and Cordery (1991) and Eves (1999, 2001, 2002) have carried out studies in relation to the effect of flooding on residential property values in the Sydney region, including the tracking of flood prone property values over time. However, no similar rigorous research has been carried out in relation to the impact of bushfires on residential property markets in the Sydney region. Residential property in Sydney is confined to the Sydney basin, which is bounded by National Parks to the north, west and south and encompasses the Georges, Parramatta and Hawkesbury river systems. Over the past ten years there have been a number of severe bushfires in the Sydney region that have resulted in substantial loss of property and in extreme cases human life. In all these cases the bushfires have commenced and or travelled through National Parks and bushland reserves, with houses adjoining or in close proximity to these parks being at the most risk of fire destruction or damage. This research project will identify those streets in Sydney that have been subject to significant full as well as partial home loss from bushfires over the period 1988 to 2002. The transactions and value of property in these locations will be tracked both before and after the fire event to quantify if the bushfires have had any significant impact on buyer behaviour and if the values of these properties in these particular streets have been affected, compared to other properties in the same location.