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Fires continue to reduce parts of Australia to cinder, and with more than 2,000 homes torched in New South Wales alone, a real estate leader is calling for better welfare and wellbeing protections for affected residents.
Starr Partners CEO Douglas Driscoll warned of the impact insurers could have on communities’ economic viability by classifying them as “red zones”.
As insurers begin to reassess areas of risk, areas labelled as “red zones” will find it difficult to secure full home and contents insurance, which will have huge implications on the insurance, banking and property sector, Mr Driscoll said.
As a result, he has called on federal, state and local governments to implement a “robust prevention plan”.
“Primarily, the government needs to ensure that the future safety and wellbeing of residents in rural and regional areas is protected, as well as their economic interests. 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,” Mr Driscoll 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. Ultimately, this will give reassurance to those households that have been affected, and future buyers.”
At an individual level, he points out how underinsurance is also a real problem as a result of these natural events.
“As we’re currently seeing across large parts of the state, it’s not until a disaster impacts on a household’s ability to rebuild that people realise what sort of insurance cover they may be missing. Likewise, I believe people looking to invest in these ‘red zones’ in the future could face significant obstacles,” the CEO said.
“For instance, 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.”
The cost of the damage will continue to escalate, with the figures from the Insurance Council of Australia from 7 January showing that claims from bushfires have exceeded $700 million. Mr Driscoll expects that it will easily surpass $1 billion.
“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 said.
“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. Surely, this wouldn’t be in the government’s best interest.”
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