Yahoo Finance Why parts of Australia will be unliveable from this year
A real estate expert has warned that the catastrophic bushfires seen this summer could render many areas financially uninhabitable.
Starr Partners chief executive Douglas Driscoll said that many fire-ravaged areas will be marked as "red zones" by insurance companies in the coming months.
Residents living in these red zones will suddenly find home and contents insurance will be difficult to obtain or become astronomically expensive.
And those locations will then die a slow economic death.
"If we’re not careful, we could find ourselves in a disastrous situation where we see a mass migration of people away from rural areas to metropolitan centres," said Driscoll.
"Surely, this wouldn’t be in the government’s best interest."
Driscoll cited a previous example to show what could happen this year on a mass scale.
"We only have to look at the insurance cost of the Townsville flood devastation, which peaked at $1.24 billion, to know that both insurers and banks are jittery about insuring or lending on a property that is at risk of flood or fire.
"We may choose a property, but until we pay down the loan in full, the bank ultimately owns it, so they are right to be nervous."
He called for the victims' financial wellbeing to be protected as well as providing immediate logistic assistance.
"While it’s good to see they are already encouraging local tourism, they need to adopt further measures to keep money from leaving these areas," he said.
"For instance, the government needs to put pressure on insurers to regulate against sharp premium increases in home insurance policies. They also need to devise a plan that will give the banks confidence to continue making loans readily available for people in fire or flood-ravaged areas.”
Putting in financial protections not only benefit the existing residents, it will give confidence to potential buyers, meaning property values won't fall off a cliff.
"Getting home loan pre-approval from a bank or financial institution is a crucial part of the property buying process. However, if buyers are struggling to get home insurance, then banks will inevitably tighten their lending."
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