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Australia Bush Fires

January 16, 2020

Australian Fires To Rain Deluge

To say Australia’s bushfires have been an awful spectacle is putting it mildly. Almost 30 million acres of Australian countryside has been torched, killing 28 people, destroying 20,000 homes and wiping out small communities.

One estimate says over 1 billion animals and birds have died, including 8,000 koalas. Wildlife has been devastated, including habitat for Koalas. As bad as it’s been, it may actually assist with an economic resurgence and help the housing market along as well.

Recent rains are a relief, however, summer is long from over.

Australia Will Rebuild, but the Housing Sector Could be Changed

The “blast furnace” Australian fires have been creating their own weather, tornadoes, and lightning. A fury bound to affect the confidence of all those living inland. Temperatures hit near 50 degrees celsius in some areas making the untended bush perfect kindling for a mega blaze.

Although some areas are seeing new rainfall, this fire season may not be over by a long shot.

Rain Bomb with High Wind and Hail is Hitting Today

In fact, the recent deluge of rains are preventing back burning by firefighters which is vital to stop future fires. And the super dry, ash laden soil can’t soak up the water. Deluges of rain could be an additional threat. Winds and temperatures are expected to grow again this coming weekend and it may be a tough summer coming in Australia.

With low rents, high rental vacancy rates and suffering tourism (Sydney), some areas of the Australian housing sector could see tougher times ahead. However, the 2020 forecast is looking fine overall as you can read about below. The fires may not directly reach Sydney, Melbourne, Brisbane, and other major urban areas, but the economic situation for property owners and investors is pressured.

Australian economists are too busy to forecast the damage to the real estate sector right now, but the stats should come in, in the weeks ahead. Check back here for that update.

Property Insurance Prices Will Rise

Estimates for just insurance losses alone from the 4 month long and continuing fires are $700 million and pushing forward to $1 Billion. The cost of mass evacuations and firefighting and future health costs haven’t been tallied yet.

The total economic damage could exceed $4.4 billion according to Moody Analytics. The Australia tourism industry council believes it takes hundreds of millions of dollars to rebuild tourism.. The drought and fires could generate sizable losses in beef and sheep production.

The property rental market will be hit, tourism for sure, and of course properties have been lost. AFR says property buyers and tourists are abandoning bushfire regions where rental shortages already occur.  Property insurance is only one cost that’s going to rise significantly and not be available.

Reports include losses related to higher insurance costs, delinquent mortgages, agriculture losses, slower tourism, lower household spending, rising unemployment, and even reduced worker productivity due to air pollution. And it’s rumored that banks are refusing mortgages on homes in flood or fire regions.

In this climate, real estate investors will be much more cautious. Due to slower spending, reduced GDP, and less exports to China, interest rates are expected to be reduced in 2020 to support the Australian economy.

Could Australia’s Energy Production be Cut?

The fires have unfortunately kindled a heated argument over Australia’s key energy sources for industry — coal. Activists are pointing to global warming as the cause of this year’s record fire season although that hasn’t been proven.

Stagnant rent prices and the persistent bush fires could put a damper on rental property investment in 2020.

Hopefully, the rains will come and damage will be reduced. We wish our Australian friends and customers best wishes in dealing with the fire crisis, and to stay safe.

 

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