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Key Highlights

  • Natural disasters such as floods, droughts, storms, cyclones, and bushfires which have plagued Australia repeatedly have widespread consequences on the livelihood and wellbeing of not just the people living in disaster-prone areas but also the entire country.
  • The researchers collated a database linking events of natural disasters, housing market performance, and demographic characteristics of Australian local government areas (LGAs). They comprehensively analysed the impact of natural disasters on local (LGA) housing market performance from 2009 to 2021.
  • The researchers proposed an empirical definition of housing market resilience as (1) dampened initial response to natural disasters and economic shocks, and (2) fast recovery after disasters to the pre-disaster levels. The degree of housing market resilience differs by disaster type and across regional and metropolitan areas.
  • The study found that ethnically diverse LGAs initially experienced smaller negative changes in house price and liquidity in natural disasters.
  • The researchers found that ethnically diverse LGAs in major metropolitan areas experience faster and stronger recovery in most cases. The findings vary by disaster type, metrics of ethnic diversity used, and housing market indicators.

Authors

Associate Professor Qiang Li and Dr Ameeta Jain, Deakin University.

Executive Summary

Natural disasters such as floods, droughts, storms, cyclones, and bushfires which have plagued Australia repeatedly have widespread consequences on the livelihood and wellbeing of not just the people living in disaster-prone areas but also the entire country. They could potentially change the entire growth trajectory of the local and national economy. We posit that house prices and market liquidity are also negatively affected by these disasters. In this report, we analyse the impact of natural disasters on housing market performance, thus characterising the resilience of local housing markets in Australia. We acknowledge that black swan events such as the global economic crisis would have a flow on effect on any economy and therefore impact on house prices; this remains outside the scope of analysis of this research. 

 

We draw on the regional and economic resilience literature to operationalise empirically the definition of housing market resilience. We define housing market resilience as (1) dampened initial response to natural disasters and economic shocks, and (2) fast recovery after disasters to the pre-disaster levels. Housing market indicators include both price and market liquidity measures. Three sets of data for Australian local government areas (LGAs) are collated to describe empirically the resilience of housing market indicators from 2008 to 2021 in the face of four types of natural disasters, including bushfires, cyclones, floods, and storms. We find that Australian local housing markets are generally resilient in that price and liquidity measures return to pre-disaster trajectories within 9 months in most cases. Metropolitan LGAs tend to be more resilient than regional LGAs.  

 

Next, we investigate factors enhancing the resilience of local housing markets in Australia. The literature on socio-economic resilience has identified diversity of industry and resources as drivers of resilience. Therefore, we investigate whether ethnic diversity supports housing market resilience. We measure ethnic diversity by people’s birthplace and their home language usage. We find that ethnic diversity generally dampens the initial negative impact of natural disasters. However, ethnic diversity could enhance or hinder post-disaster recovery depending on disaster type, LGA type, type of housing market indicators, and the metrics of ethnic diversity used. Overall, diversity contributes to market resilience in metropolitan LGAs in most cases. In regional LGAs, the results are more divergent.  

 

The results of this study will assist property professionals in understanding disaster risk more deeply. Specifically, the report offers a clear definition of housing market resilience, analyses the consequences of natural disasters comprehensively, and identifies determinants of housing market resilience extensively. It could help policy makers to formulate policies to preserve housing market resilience and to reduce losses from natural disasters.

Media and Other Resources

Media coverage

Article: Understanding Housing Market Resilience in Australia | The Australia & New Zealand Property Journal

 

Previous APREF Research

 

This research was funded by the Australian Property Research and Education Fund (APREF). Learn more about APREF here.