What is the impact of natural disasters on property markets?

The contrast between Mallacoota and Lismore illustrates this clearly.

Mallacoota was one of the communities most severely impacted by the 2019-2020 Black Summer bushfires. Despite this, the property market recovered in the years that followed. Given the suburb’s small number of transactions, a 24-month rolling median provides a clearer view of underlying trends. On this measure, house prices rose steadily from pre-bushfire levels, increasing by around 25 to 30 per cent in the years after the fires. During the COVID-era regional boom, prices lifted further before easing back, but the overall trend points to recovery rather than lasting damage. Lifestyle appeal, limited supply and pandemic-driven demand all supported buyer confidence.

Lismore’s experience has been different. While long-term prices have not collapsed outright, repeated and severe flooding events have disrupted the normal recovery process. Rising insurance costs, insurer withdrawal and government-led home buyback programs have constrained demand and increased uncertainty. The 24-month rolling median shows a clear interruption to price momentum following major flood events, with recovery slower and more fragile than in markets that experienced more isolated disasters. In this case, the frequency and certainty of risk has led to a more fundamental reassessment by buyers.

Together, these examples highlight an important point. It is often not the disaster itself that determines long-term price outcomes, but whether repeated events alter perceptions of ongoing risk and future viability.

This broader pattern is reflected elsewhere. Research by Siddhant Saha from the University of New South Wales examined the impact of the 2019–2020 bushfires on Sydney’s housing market. The study found that properties in bushfire-prone areas experienced price declines of between 6 and 24 per cent in parts of Hawkesbury, while the Blue Mountains saw smaller falls of 0.2 to 5.2 per cent. Crucially, these impacts were temporary, with most markets recovering within 12 to 24 months.

A similar outcome was observed following the 2011 Brisbane floods. While affected suburbs initially recorded price declines, by 2017 median values were well above pre-flood levels. In these cases, disasters acted as short-term shocks rather than triggers for lasting changes in buyer behaviour.

The speed and strength of recovery tends to depend on several key factors.

Insurance coverage
Areas with higher levels of insurance coverage typically recover faster, as residents have the financial capacity to rebuild. This often creates a wealth divide, with more affluent communities bouncing back more quickly than less well-insured areas.

Demographics
Age also plays a role. Older residents are often more willing to remain in disaster-prone locations, potentially reflecting stronger community ties and longer-term ownership.

Government response
Significant government investment in disaster mitigation, such as flood levees, fire breaks and improved emergency response infrastructure, is often associated with stronger price recoveries and renewed buyer confidence.

Quality of rebuilds
Rebuilding can improve long-term market outcomes. Homes constructed after disasters are often built to higher standards, incorporating improved materials, better design and greater resilience to future events. Updated planning controls and building codes can result in a housing stock that is superior to what existed previously.

Location desirability
Many high-risk locations continue to command premium prices. Coastal towns, riverside suburbs and bush retreats retain strong appeal, with lifestyle benefits often outweighing perceived risks for many buyers.

Market conditions

Broader market conditions also matter. Disasters that occur during periods of strong housing demand and favourable financial conditions are more likely to be followed by price recovery, while those coinciding with weaker markets can have more lasting effects by amplifying existing demand constraints.

Recent Climate Valuation data highlights this tension. Even in areas where more than 80 per cent of properties face a high risk of becoming uninsurable due to flooding, most still recorded above-average price growth over the past five years. This suggests long-term climate risks may still be underweighted in buyer decision-making.

However, as Lismore demonstrates, repeated exposure to disasters can eventually shift this balance. Queensland has already shown greater price sensitivity to flood risk, likely reflecting the impact of frequent major flooding events on buyer awareness and confidence.

Insurance is becoming increasingly important in this process. As premiums rise and coverage becomes harder to secure in high-risk areas, properties that reduce insurance costs may attract price premiums, while others face mounting pressure.

For homebuyers and investors, several clear themes emerge:

• Property markets often recover after isolated disaster events
• Repeated disasters can lead to prolonged underperformance rather than rebound
• Insurance costs and availability are becoming critical drivers of value
• Government mitigation and rebuild quality play a growing role in resilience

As climate-related risks continue to evolve, property markets are likely to become more sophisticated in how these risks are priced. The enduring appeal of lifestyle locations suggests risk will not be priced uniformly. The challenge for policymakers and buyers alike is ensuring communities remain viable as natural disasters become more frequent.