As Australia prepares for a hot and dry El Nino summer, a respected buyers’ agent has warned there are several ways the weather event could impact the property market.
Aus Property Professionals Founder and property author Lloyd Edge said El Nino could go so far as to indirectly affect property prices, if the expected hot weather impacts crops, food supply, energy costs and transport costs.
“Food costs will go up, energy costs will go up and then that can lead to higher inflation and put downward pressure on property prices as the cost of living goes higher,” he said.
“The RBA might then revisit what they’re looking to do with interest rates.
“They’ve been on hold for the last three months but, if inflation starts to creep up again, because of the cost of living, the RBA might decide that they need to look at another rate increase instead of a potential decrease.”
Mr Edge said if that scenario did play out, it would be something that would occur gradually, rather than suddenly.
He said if the cost of living continued to rise as a result of higher food, transport and energy costs associated with El Nino, another effect could be a reduction in buyers’ borrowing power.
“What banks do these days is carefully scrutinise your spending habits and take a look at your bank statements,” Mr Edge said.
“If they look at how much you’re spending on food and petrol and everything then that can affect how much you can borrow.
“And if your serviceability goes down that can in turn affect property prices because there might be less people able to afford property at a certain price.”
Mr Edge’s comments come after the Bureau of Meteorology officially declared an El Nino weather event was officially underway.
El Nino occurs when water in the Pacific Ocean gets warmer than normal and this warm water affects the air above it, changing weather patterns in several places around the world.
Bureau of Meteorology Climate Manager Dr Karl Braganza said both El Niño and a positive Indian Ocean Dipole (IOD) tend to draw rain away from Australia.
“Over spring, their combined impact can increase the chance of below average rainfall over much of the continent and higher temperatures across the southern two-thirds of the country,” Dr Braganza said.
“The Bureau’s three-month forecast for Australian rainfall and temperature have been indicating warm and dry conditions for some time.”
“An established El Niño and positive IOD reinforces our confidence in those predictions. Based on history, it is now also more likely that warm and dry conditions will persist over eastern Australia until autumn.”
Mr Edge said vendors and landlords also had to ensure they were preparing their home to cope with the environmental impact of El Nino.
He said with the increased risk of bushfires it was important for vendors and landlords to ensure they had the correct insurance policies in place, as well as clearing fuel loads, such as long grass and leaves in gutters, from around the property.
“In terms of making the property attractive to sell, things that will help will be cost efficient appliances and even some solar,” Mr Edge said.
“One of the things that will happen is, as the temperatures go up, there is going to be a real drain on power.
“There will be a lot more use of air conditioners and, if the property has some appliances that may use a bit too much power, the owner can maybe look to tap into some energy saving devices, which will make it more attractive to buyers.”
Mr Edge said water efficient irrigation systems would also help, and while air conditioning wasn’t a deal breaker with buyers in cooler climates, in Queensland, air conditioning is a must on buyers’ wishlists.