Should Property Investors be aware of buying in an area that has previously been devastated by a natural disaster?

Should Property Investors be aware of buying in an area that has previously been devastated by a natural disaster?

After the smoke has cleared or the water has receded and damage becomes apparent what of the property investors livelihood and the stability of the local property market into the future?

Although it seems trivial to measure the dollar value of property damage given the devastating loss of human life that has occurred in recent years as a result of fires and floods the fact is the impact of natural disasters on homeowners and investor’s financial well being can be totally demoralising and destroying.

Professor Chris Eves from the Queensland University of Technology says “There is a direct and indirect impact on property values following a natural disaster.  A property completely destroyed as a result of bushfires probably won’t be the same as if it were damaged by flooding.  With flooding while the damage might be severe,  the property won’t be destroyed but there will be a stigma attached to it that will last longer than a stigma from a bushfire.”

Eves goes on to say “Properties in a serious flood will have a short term decline in value of 17 – 25%. (This may vary with location)  After 12 months with no further flooding, values start to recover and with no additional occurrence after few years, prices will return to normal levels”

Investors have the potential to buy into the market when prices have declined and wait for strong long term capitol gains as real estate rebounds.  If they are buying straight after a disaster there will be issues as far as finance and insurance go and they will have to take that into account. 

According to research if an area is considered high risk it is also has the capacity to provide a higher capitol return over time.  Investing should not be about short term returns but rather the steady long term returns.

So have the endurance to stand during and after adversity has come knowing that your investment property will increase in value with a continued upward trend.